As we saw in Part 2, sometimes a better trade lies with a different stock. That said, often the trade is compelling such as in the case of the Caterpillar Stock example from Part 2. If you still want to trade Caterpillar Stock consider more protection but possibly less profit which other strategies might provide. A good strategy for 2014 may lie with put credit spreads the focus of Part 3 of the series on making 2014 a profitable year.
Why I Focus Away From Spreads
Spreads are not as common a trade strategy for me primarily as I sell puts against stocks I would own. That gives me a great deal of confidence. I like the stocks I sell puts against and I have a lot of rescue strategies to draw upon. Even in the 2008 and 2009 markets I sold naked puts against stocks I would own. As explained in Part 1 of this series, I do not like buying an option which is a asset that erodes over time. This is often why instead of buying calls with the Bollinger Bands Strategy Trade I prefer the stock. With the stock I have an asset that may decline in value but the chance of it leaving me with a full loss is low. By holding stock even in a downturn I earn the dividend and I can continue trade strategies against shares that continue to generate income. When I buy options they have an expiry date and often I found I spent time and commissions adjusting these bought options to try to keep them profitable.
In Part Three of this series for FullyInformed Members, on making 2014 a more profitable year, I look at a wide variety of put credit spread examples and ideas. Part three is lengthy at 2500 words and will require 7 pages if printed. While lengthy I believe the explanations and examples are needed to fully discuss and comprehend the pros and cons of using Put Credit Spreads against specific stocks in 2014.
FullyInformed Members
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