When a strong stock collapses it presents a unique opportunity for above average profits. It also presents the possibility of capital loss if Put Selling is entered into without a strategy in place to maximize return and guard capital in use from potential losses.
Put Selling When A Strong Stock Collapses
On Friday Nov 7 I closed out 3 positions in Disney stock by buying back and closing naked puts which I had previously sold. These trades were started on October 2, October 15 and October 20. You can review all of these trades in the 2014 trade tables for Disney stock through this link. Those trades demonstrate the strategy I have used for years for bringing in bigger profits than usual on strong stocks that have entered into corrections or pullbacks.
Even Strong Stocks Like Disney Stock Will Drop
Disney Stock is definitely doing well. Revenue continues to grow in all segments of its business except one. 2015 looks even better for Disney Stock which you can read in this article. But no matter how terrific or stellar a stock is doing, there will be times when even the strongest of stocks will fall. Some fall because of an announcement, earnings miss, change of leadership or a myriad of other reasons. Often though a stock will fall because the entire market is falling and investors panic whenever stocks begin to pull back. When that happens many investors dump shares in all their stocks, including the strong ones, even if there is no reason to do so.
Since the fall of 2011 to the fall of 2014 there have been 6 corrections in Disney stock and 9 pullbacks that I have traded against. Each one of these has resulted in significant returns but also more importantly, a high level of safety for my capital in use.
Profiting Big From A Stock Pullback or Correction
Pullbacks and Corrections are actually an opportunity for investors who follow strong stocks like Disney, Home Depot or Costco to mention just 3. Pullbacks and corrections provide larger than usual put premiums and can boost a return tremendously. The problem is, how to take advantage of the opportunity presented during pullbacks and corrections while at the same time protecting capital from potential losses particularly in a correction of a stock.
This member’s strategy article is 4500 words in length. It will require 17 pages if printed. This article outlines how each trade accomplished works toward supporting the previous trade done with the focus on protecting capital in use while aiming for above average returns through Put Selling.
FullyInformed USA Members can can access this strategy article directly through this link or sign in to the full USA members site here. Non-members can join here or read about the benefits of a membership.
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.