Many options investors start out trading covered calls and the naked puts. The concept sounds attractive: "Earn 2-3% per month premium and continue to roll positions or write new options each month, regardless of the direction of the stock." In theory this sounds great, but in practice we know there is a darker side to these strategies...the downside. The big winners get called away for a small gain; the losers stay in our portfolio and need to be managed for an extended period of time.
Over time a covered call or naked put investor will have several positions that decline. Many investors find that over a 12 or 24 month period, even though they were consistently selling premium or adjusting positions, their total portfolio value is down from where they started. This does not sound like a 'Wealth Option'.
How can we still take advantage of big moves to the upside while guaranteeing that we can't lose more than 6%-7% even during a Black Swan event? The answer is the Married Put strategy - and you can quickly find the best candidates for a protected stock position using PowerOptions.
Whether you are trading low priced stocks in the $10-$30 range or looking for higher priced securities, the Married Put Search tool will find the protected stock positions that best match your risk tolerance.
If you are not already signed into the site... Log on to PowerOptions
Click the Married Put Tab.
Click Search. Here's what you'll see...
The default Search that is selected is '**RadioActive sort by EPSG'. The criteria used in this screen are based on Kurt Frankenberg and Ernie Zerenner's preferred criteria when looking for new candidates to open a RadioActive Profit Machine as outlined in The Blueprint. As you can see there are candidates in the lower price stock ranges (ETFC @ $21.01) and the higher priced stock ranges (PII @ $147.28).
Each position has a risk of less than 9%. If you wish to adjust the maximum risk or the stock price range simply scroll down beneath the trades and look at the parameter field:
Options Tab - Adjust the % Maximum Risk field from 3.5 to 9 to a level that matches your risk tolerance (less than 7.5%, for example).
Fundamentals Tab - The default stock price is set to look for stocks between $9 and $200 per share. Simply adjust the stock price filter to match your goals ($5 to $75 per share for example, based on your Portfolio size).
If you wish to look for good protected stock positions on a stock you have been tracking or a stock you are invested in:
Click the Married Put tab and then Search By Symbol. Enter in your stock symbol and select 'All Expirations'. Scroll through the listed trades and look for the first expiration month that is at least 150 days out in time. The days to expiration will be shown in parentheses: 2015 MAR 155.0 (226) means there are 226 days until MARCH expiration. Change the month selection drop down menu to identify which put gives you the best % Maximum Risk for your risk tolerance.
If you own a stock that is up in price, click on the Insurance tool. This will allow you to input your stock symbol and purchase price. The Insurance tool will show you potential put candidates that can lock in most of your unrealized gain and potentially Bulletproof your position!
Put Options - Buying Put Options - Best Married Puts