We all worry about the possibility of a large catastrophe at one time or another. When we see the devastation of Hurricane Katrina, Tsunami’s, terrorist plots or recent mining disasters we reflect on what we would do in such a situation. Is there some way you can insure your personal stock portfolio from such catastrophes?
Selling put options is one of the more popular income generating strategies used by options-savvy investors. Generally, the strategy involves selling an Out of the Money (OTM) put on a stock on which you are bullish. This means the price of the underlying stock is higher than the strike price of the put option. The option may be 5-10% OTM at the time it is written.
There are three popular options strategies for generating income, each of which allows investors to collect a premium while adding protection to their portfolios. The three strategies-best used in stagnant to bullish market conditions-are:
Imagine yourself owning a nice apartment building in a nice neighborhood. You have no tenants, you have no plans to get tenants, and you hold onto the building hoping it will appreciate enough to earn you a few dollars sometime in the future.
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The champagne corks have been popped, friends have toasted to good health and resolutions for the New Year have been made. The streets have been swept clean of confetti just as many portfolios have been swept clean of stocks that yielded year-end losses.