8 Tips For Selling Puts In Volatile Stocks

Jun 18, 2015 | Profit And Income Strategies, Stock Market Outlook

Selling put options for income or to eventually own stocks is a strategy of small gains. The goal is to either earn income or keep reducing eventual stock ownership through selling a put option for a small gain. Many options trade for just 25 cents while others can be above $1.00, but in general a 1% return each month is a reasonable goal to aim for. Recently an investor asked about his trade ideas for CBI Stock which is Chicago Bridge & Iron Company.

The interest in trading against CBI Stock is obvious when you look at the option premiums. CBI Stock has high option premiums making them attractive for selling options. However like all volatile stocks, those high options are also a warning that the stock can change direction often which can make selling options tricky. Let’s review the questions and look at some answers.

Investor Questions:

Teddi and others what do you think about CBI puts?

I successfully traded weekly calls and puts in CBI for the last 6 months, then got my calls exercised when the stock shot up to $59. Since then it has slowly slid back down as the buy in was way overdone. Looking at the July 17 puts, the premiums are handsome, and the downside protection is huge. Buffet also owns something like 8% of CBI with an average price around $65.

Anyone else see the July 17 $45 or $42.50 put as a good option? Wrightflyer

This strategy discussion article is 1800 words in length and will require 8 pages if printed. It is designed for USA Members interested in trading volatile stock like Chicago Bridge & Iron Stock.

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Disclaimer: There are risks involved in all investment strategies and investors can and do lose capital. Trade at your own risk. Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed and presented are financial or trading advice or recommendations. Everything presented and discussed are the author’s own trade ideas and opinions which the author may or may not enter into. The author assumes no liability for topics, ideas, errors, omissions, content and external links and trades done or not done. The author may or may not enter the trades mentioned. Some positions in mentioned stocks may already be held or are being adjusted.