I don’t sell many Puts but I just sold 20 on Snap (SNAP).
SNAP has been hanging around $16 for a while. Today with the market starting down the stock took a big dip, about 40¢, or 2.5%. I did some research and saw that SNAP has an imbalance of Calls to Puts. The amount of Calls was much higher than Puts. The near term $16.50 options have high Open Interest and high Volume. This tells me that many traders feel SNAP will be going up, near term. I feel the stock will hang around the $16 to $16.25 area. The information I looked at tells me the stock will not be taking a big drop. You never know but I decided to sell 20 contracts of the SNAP $15.50 Puts that will expire this Friday. I received a premium of 30¢ for $600 on the 20 contracts.
Sell to Open 20 SNAP 9/20/19 $15.50 P @ 30¢ (+$600)
Selling a Put, what does that mean?
When selling a Put, in exchange for a premium, you give the Put buyer the right to sell you the stock at the Strike Price. With this SNAP Put I sold someone the right to sell me 2000 shares of SNAP for $15.50, and I have the obligation to buy. If the stock goes below $15.50 they will sell me the shares of SNAP. If the stock stays above $15.50 they will not sell me the stock because they can sell the stock on the open market for the higher price. I feel, and hope, the stock stays above my Strike Price of $15.50 and the option expires. And I keep the $600!
I give this trade a Risk Factor 2. I do not think there’s much risk involved in this trade. The worse thing that can happen is I buy the stock at $15.50. If that happens, I start selling Calls against the 2000 shares and bring in some premiums. The reason I didn’t give this trade a Risk Factor 1 is there’s always a chance the stock takes a big flop and I own it at $15.50. I don’t think this will happen before Friday.
I have 2 other orders placed and I’m waiting for them to get filled.
On 7/18/19 I bought a 10 contract Call on Micron. I paid $7.50. I placed an order to sell this option for $10.50. This would be a $3000 gain. Let’s see what happens.
Also with Micron down about $1 today I decided to sell a $49 Put. I placed the order for a 70¢ premium. I’ll let you know if I get filled on either of these orders.
Steve
The Options Coach