Comments on: What’s another way to invest while avoiding losses?

By: Dividendium

Dividendium — Thu, 13 May 2010 12:38:35 +0000

I like the idea of using PUT options to get into long positions. But I'd probably use a PUT spread to do this, rather than just a single PUT.

I don't like to be fully exposed, and in the case of a single PUT, if the stock goes down significantly for some surprise reason (embezzling, lawsuits, etc), I would be on the hook for all but a small part of that price drop.

By: Dhaval

Dhaval — Wed, 12 May 2010 20:36:05 +0000

Good articles on various strategies here. One strategy (which is fundamental purpose of PUT option) I have employed lately is that never buy stocks directly. Always sell PUT options for that in the money (close to 5% return margin). If option was not exercised, you got free money (option premium) and if that got exercised, you still saved in stock price by the premium you collected. You would have taken that loss on paper otherwise.

By: Dividendium

Dividendium — Fri, 26 Mar 2010 19:48:33 +0000

Your strategy sounds like another strategy that I have on the site called Inflatable Dividends (dividend capture with covered calls).

By: Mark C

Mark C — Fri, 26 Mar 2010 19:26:37 +0000

I take a polar opposite approach to yours, but in both manners we are gambling to some degree but with less risk than playing stocks alone. I gave up on mutual funds after watching the professionals decimate my retirement accounts.

I sell covered calls that are usually in the money, but only if there is a premium. I hope to gain 2-5% monthly with the downside of:

#1 - The stock falling below the strike and therefore well below what I paid for it. But even with this strategy I covered some of my loss by selling in the money at a premium.

#2 - The stock soaring and thus lost opportunity for me. Even still, I get 2-5% gain.

Thanks for your site, it is very informative. The ex-div calendar helps boost the income and reduce the risk of my stated strategy.