Pros and Cons of Selling a Put
Selling a put can be a very effective way to increase your profit in the stock market.
It helps to bring some income to the account while at the same time letting you get into longer term positions.
The pros to this strategy are: 1.
You Get Money Upfront The best thing about deciding to sell a put is that you make your profit up front.
Not many strategies out there let you make money once you enter the trade.
2.
Cashflow Can Add Up The premium you make for selling 1 put can be pretty small when you compare it to what you could possibly make by either buying the stock and it shooting up, or buying a call.
But selling more and more premium adds up pretty quickly.
The Cons of this Strategy Are: 1.
Might Have to Buy a Stock If you sell a put on a stock you might end up having to buy it.
This isn't always a bad thing especially if you know that you like the stock and would not mind holding onto it for a while.
2.
Might Miss a Profit If you want to enter the position and Wright a put you could potentially miss a big move.
It does happen you sell a premium on the stock for $3 and the next month the stock shoots up 15 points.
But if you do sell premium you have to realize, you give up the opportunity to make huge overnight gains for consistency, and that is not such a bad trade off.
It helps to bring some income to the account while at the same time letting you get into longer term positions.
The pros to this strategy are: 1.
You Get Money Upfront The best thing about deciding to sell a put is that you make your profit up front.
Not many strategies out there let you make money once you enter the trade.
2.
Cashflow Can Add Up The premium you make for selling 1 put can be pretty small when you compare it to what you could possibly make by either buying the stock and it shooting up, or buying a call.
But selling more and more premium adds up pretty quickly.
The Cons of this Strategy Are: 1.
Might Have to Buy a Stock If you sell a put on a stock you might end up having to buy it.
This isn't always a bad thing especially if you know that you like the stock and would not mind holding onto it for a while.
2.
Might Miss a Profit If you want to enter the position and Wright a put you could potentially miss a big move.
It does happen you sell a premium on the stock for $3 and the next month the stock shoots up 15 points.
But if you do sell premium you have to realize, you give up the opportunity to make huge overnight gains for consistency, and that is not such a bad trade off.
