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Writing/Selling Put Options


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Has anyone ever done this? If so do you have a broker recommendation?

As I am a silver buyer anyway, it's something I'm considering it.. definitely for silver/metals and possibly other assets.

http://thesovereigninvestor.com/investment-opportunities/selling-put-options-better-income-yield/

 

In theory you could also use it to get paid to sell when such time comes that you want to sell your PMs.

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1 hour ago, vand said:

Has anyone ever done this? If so do you have a broker recommendation?

As I am a silver buyer anyway, it's something I'm considering it.. definitely for silver/metals and possibly other assets.

http://thesovereigninvestor.com/investment-opportunities/selling-put-options-better-income-yield/

 

In theory you could also use it to get paid to sell when such time comes that you want to sell your PMs.

I did flirt with the idea several years ago and worked out a strategy that seemed sound. The problem was the difficulty for the small retail investor to actually sell these options, it proved impossible at the time.

Profile picture with thanks to Carl Vernon

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I did in the early 90's writing options is the best way to go, you also as you still own the shares get any dividends that are announced while your stock is lodged.

Free advice do not write naked options the risks are very high.

I can't remember the company I used it was either Charles Stanley or BNP. If I remember correctly everything was cleared through L.O.C.H,I have found this,which I guess is what LOCH is called now http://www.lch.com/home .You could also contact your own bank, they won't have a clue at the branch what you are talking about but will be able to put you in touch with someone within the organisation that does.

Slightly different but I got to speak with some very knowledgeable   people regarding currency hedging forward within HSBC, branch manager was clueless LOL.

 

The problem with common sense is, its not that common.

 

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Am I making this more complicated than it needs to be?

 

There seems to be a huge disconnect between the articles I read and the exact steps that are required to do (eg what brokers to use, what contracts to look for).

 

 

 

Could I get the same effect by going short (ie sell) a naked put, eg sell an out of the money spreadbet option?

 

So if the strike price isn't met the value of the option falls to zero, and I get to pocket the premium value x bet size...

 

.. and if the strike price is met then I will obviously be out of pocket in my trading account, but will then be able to buy the metal cheaply as the market price will have fallen.

 

 

The problem is that City Index's "options" bet sizes are £2.08 per point, with a strike price of eg "12,000" (which I presume equates to $1200 gold).

 

Effectively this lock you in with an obligation to buy £2.08 x 12000 = £24960's worth of gold, should the strike price be met at expiry.... which way beyond sleeping point for me.

 

So if gold fell by 10% below strike price at expiration (10800) I would be liable for -1200 x 2.08 = -£2496 in my trading account, but would then be able to buy the same amount of gold at current market price of $1080 as I would have had it been at $1200.

 

Is my maths correct here? 

 

Does anyone know a trading platform that allows me to do this but on a smaller contract/bet size?

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1 hour ago, vand said:

Am I making this more complicated than it needs to be?

 

 

 

 

 

 

 

 

 

 

 

In a word yes.At the time I had 3000 shares in BT & 2000 in Glaxo. In todays money & if options writing is the same as then, 1st you would purchase 2000 shares in Glaxo which without splitting hairs would be £30k, BT around 14K then you would lodge them, chose what strike price you wanted & expiry date then collect your premium.

You needed to buy a minimum of 1000 shares in any FTSE quoted company as each contract was for a minimum of 1000 shares.

You could do that up to 4 times per year as then the default expiry was every 3 months. The best shares to do option writing with are shares that are not too volatile. You could get a return of 20-30% if everything goes your way without too much difficulty. I always wrote call options which is the least risky way of doing it.

The opposite of what you are thinking, if you are just wanting to punt try spread betting.

The problem with common sense is, its not that common.

 

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