Does Selling Put Options During A Market Downturn Provide A Safety Net?

put optionsIn a significant market downturn, bearish sentiment, if not outright fear, can drive down the share price of good companies rather drastically.  When the market is in a sustained selling mood, there can be a substantial disconnect between the long-term fundamentals and the technical price action we see on the chart.

What can we do when good companies are trading at what appear to be bargain prices?  We could “stick our toe in the water” and buy shares.  But what if we’re wrong about whether a bottom in the share price is in place?  Or what if the stock takes a very long time to build a base and goes nowhere for an extended period?

Rather than buying shares, we could sell put options instead.  It’s a strategy famously used by Warren Buffett to acquire shares at a discount.

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The post Does Selling Put Options During A Market Downturn Provide A Safety Net? originally appeared at TheTechnicalTraders.com.

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Adrian Collins works as an Outreach Manager at Option Dash. Option Dash is always looking forward to offering the best covered call and cash secured put screener on the internet. Adrian is passionate about spreading knowledge on stock and options trading for the rising investors.