Hey Guys,
Yesterday, after being down most of the day, the market had a triumphant rally in the last hour or so. But this morning, its given back a lot of that ground. The market is experiencing volatility right now.
I bought some new positions today. In the main account, I bought SNPS and WIX. In the extra options account, I bought options for AAPL. In the low-priced account, I bought shares of PLUG and FAST. Note: AAPL stock also qualified for a purchase, but I already had bought stock two positions in my main account and therefore didn't take the trade. But I would have loved to have bought AAPL. You can see details for the potential AAPL purchase on the watch list.
My IP options trade hit its profit target this morning. That was fast -- it only took a day for it to reach the profit target, which isn't typical.
I want to point out the TXN options trade that got closed yesterday. I sold a naked put for TXN when the stock was priced at 179.75. By the time I closed the position yesterday, the stock was down to 178.72. Despite the stock being down, I locked in a small profit on the position. That exemplifies one of the benefits of selling naked puts. The price of the stock can go sideways or even down a bit, and still earn a profit. If I had bought call options for that same trade, I would have lost almost the entire amount I paid. Time decay works against you when you buy options, and it works for you when you sell options.
That said, there is a tradeoff to consider. When you sell a naked put, your earnings potential is typically less than that of the call option setups I trade. Also, it doesn't have a cap on the downside risk. When you buy a call option, you can only lose as much as you paid, but with selling a naked put, there isn't a cap to that risk. I use stoplosses for naked puts, but they still have a bigger loss potential than the call option setups I trade.
If you have any questions or feedback, I'd love to hear from you.