Pursuing Early Financial Independence through Dividend Growth Investing and other Passive Income. So money for free. My question is, Why would somebody want to do this? Kind regards Louis Gunn. Louis, Put options can be a great way to generate extra income. This isn't the greatest example because I'll usually try and get a sell difference between the outright purchase and put option execution. If you have capital that you want to invest but want a cheaper price you're effectively setting a limit order but get paid until it hits. Thanks for stopping by! HI JC Great article explaining how you can use Put options to lower your cost to purchase a company, do you also use covered Call options for generating income on your current holdings? I haven't managed to find a UK broker who will write options they all seem to be interested in Spread Betting or Warrantsso another reason that US investors have major benefits over UK investors: FI UK, I typically don't write covered calls because I don't want to risk closing out the position. If I do want to close out or reduce my position but it doesn't necessarily have to be quick then I'll write calls. Thats surprising that there's not a lot of choices for writing options in the UK. Im sure you can fund one or maybe one of the other bloggers can help you out. Thanks for the rundown of your strategy. I will probably adopt it soon enough. Keep those premiums coming in! PIP, Thanks for the explanation. I have never used options and probably won't start, but it's nice to know that I could. Thanks for explaining the put option to get better price on stocks. I had to read a few times to really finally get it. I am curious to try it out some day Thanks for the post! Really valuable information for those of us interested in selling put options. Thanks for sharing the spreadsheet, too! BTW, I've include your blog in my newly compiled blogroll at http: I have never understood how options work and this article definitely helps a bit. DGJ, In the US options can be executed at any time once the contract is open. At expiration the execution is based off the closing share price of the last trading day for that option. As a note I've yet to have an option executed early. And I suspect you'd option see that happen if the share price took a huge dip in price. PIP, Nice explanation and this is why I love selling puts. I have a few new trades I need dividend post for this week. I rolled forward my ESV put and sold a couple GE puts. Everything is so elevated, I'm running out of good ideas for companies I'd actually want to buy. I'm currently watching MO and PM for dividend good entry though and will likely put in a limit order. I think we both made some nice profits earlier in the year with PM. Anything you are looking at? Hello PIP, Thanks for the article; it was very informative. I have two quick questions that hopefully you could answer: Can you briefly discuss the tax implications of doing this how is this taxed, are there special tax forms, etc. I'm referring to both when you get the income from an unexercised put option that expires and when someone exercises an option that's in the money. Do I understand it correctly that you can really only use this strategy if you're willing to buy at least shares for you dividend portfolio? In your example above, if you only wanted to add 50 shares of Coca Cola to dividend portfolio, then there's no way that this would work, right? PIP, It's too bad that you haven't answered my comment in over a week. Of course, you're under no obligation to answer any questions from readers, but I hope you realize that this is one of the key things that makes for a good blog. This is one of the main reasons why I'm a big fan of Dividend Mantra - he always responds to comments in a timely fashion, even if the comments aren't from some big name blog. Hopefully you can now see why your blog will never be as good as that of put like Dividend Mantra, unless you change this. Hi Mike, I can only answer point 2. You are right, for almost all options the multiplier is So there is no way to add ladder 50 KO. Very good explanation of put selling, and very timely for me. I'm looking to execute my first trade. I was interested in writing a KO option, but the premium just looks too low. It requires more capital to be set aside, but for potentially much larger premium. I'm also looking at something a bit more long dated, that gives you slightly more premium. Do you have any bias to more long dated vs short dated put options? I agree this is a good way to potentially make some money while waiting to buy a stock. But I have a question about how you assess the profitability If you sell a put, don't you need to keep enough cash to cover the potential cost? To me, that represents an opportunity cost that you have account for in deciding how much premium to take. That seems like a high hurdle, and I dont usually see high premiums on the kinds of stocks I want to own. Am I looking at this wrong? I've considered selling puts since you I thought it was you? Maybe it dividend AAI ran a multi-part article on it. I usually don't ever have 4k in capital sitting my sell, though. Can you buy partial contracts? Pages Home My Portfolio Dividend Income Option Summary Goals Progress Stock Analysis Learning Center Guest Posts Subscribe. Tuesday, August 26, The Best of Both Worlds: Obviously the most important part about investing is finding the truly great companies that have the ability to grow profits and dividends for decades on end. Once you identify those companies through a qualitative analysis the next step I like to take is a fundamental analysis to determine what a "fair value" for the company's shares is. After you determine what price you'd be willing put pay for the future growth and income stream that a company provides you can see where put current share price lies on the value spectrum, i. My preferred method is open market purchases but sometimes the value just isn't there and put options give By selling a put option you are selling someone the right to sell shares of a company at a predetermined price. Now no one is going to give up their "option" for free so in return the seller receives an option premium. We'll use Coca-Cola KO Full Analysis Here sell shares are currently trading for about a 1. If I'm a stickler for not paying more than what I deem to be a fair value price then Coca-Cola wouldn't be a possibility right now unless I use put options. Let's look at the options that expire September 26th. Posted by Passive Put at 5: Share to Twitter Share to Facebook Share to Pinterest. Louis Gunn August 26, at 6: Passive IncomePursuit August 26, at 7: Financial Independence UK August 26, at 6: Uwe Voelker August 26, at 6: Asset-Grinder August 26, at 1: KeithX August 26, at 9: Fab August 26, at FerdiS August 27, at Dividend Growth Journey August 27, at 1: Passive IncomePursuit August 27, at 1: All About Interest August 28, at 9: Mike August 29, at Anonymous September 7, at Uwe Voelker September 7, at 1: Integrator August 30, at Anonymous August 31, at Wallet Engineers September 11, at Newer Post Older Post Home. My goal is to reach financial independence at a very early age by aggressive saving and investing in dividend growth stocks. Click here to learn more of my story. 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Since 1981, the amount of time kids spend playing sports has decreased by 58 percent for six- to eight-year-olds, 19 percent for nine- to eleven-year- olds, 43 percent for twelve- to fourteen-year-olds, and 28 percent for fifteen- to seventeen-year-olds Evidence 2-According to a 2004 report by the Centers for Disease Control (CDC) of the Department of Health and Human Services.
American writers are not only striving for visibility in the United States.
His successors down the ages recorded their observations of people that they encountered in their travels.
Since 1981, the amount of time kids spend playing sports has decreased by 58 percent for six- to eight-year-olds, 19 percent for nine- to eleven-year- olds, 43 percent for twelve- to fourteen-year-olds, and 28 percent for fifteen- to seventeen-year-olds Evidence 2-According to a 2004 report by the Centers for Disease Control (CDC) of the Department of Health and Human Services.
Published: March 14, 2005 (between Half-Blood Prince and Deathly Hallows) - Updated: March 14, 2005.