In April I wanted to keep an eye on $NFLX and possibly buy $NFLX if it ever gets to $75 again. I should have created an alert, instead I fell for the age-old mistake of selling one put to track. With the results out last night, and the stock price is looking to open below $70… and the stock may take another 2 or 3 quarters to steady… suddenly the put sale looks stupid.
Ex-Post regrets tell you never to sell a put with a goal of buying at lower price.
When you sell puts, you REALLY have to mean it. And by “mean” I mean that you are truly willing to buy those shares at the strike price (minus the premium received).
I just glanced at my account and I have puts out on 5 different stocks (maybe a record) and for each and every one of them I would be happy buying those shares. For example, right now I have a $45 strike put on OXY, and in fact most of my OXY shares were acquired via assigned puts at all sorts of strikes between 42.5 and 62.5. And yet, most of my OXY puts do expire worthless. Been selling OXY puts regularly since 2024. The whole thing began as a ride on the coattails of Berkshire Hathaway.
Unless you plan on perfect timing every time, it’s not stupid until a few years go by and you can measure the actual return from the trade!
Most of the put sales I am not intending to take shares. On a given year, roughly I sell around 1000 transactions over 30 to 40 names at any given time and each of the transactions typically range between 10 to 50. The entire strategy is for generating income.
My mistake was I should have accepted the loss and closed it. To begin with, I should not have sold that one single contract for tracking. You track using watchlist, that was the original sin. 
But that wasn’t my point. Intent has little to do with it (other than choosing strike prices). I also don’t intend to take shares for all the puts I sell, if I did, OXY would have already become too large a position in my portfolio. My point was that when you sell puts, you have to be READY and WILLING to take those shares (or, obviously, pay the penalty to unwind the option trade before assignment at an unfavorable price). Heck, I have had a few options assigned to me that weren’t rational assignments, in other words, the owner by selling the option would have earned more than by exercising it. In that case, someone can be assigned out of the blue when totally unexpected. But apparently sometimes people make non-rational investing decisions, or simply mistakes.
If I look roughly at my trades over the years, 95+% of my put sales ended up generating income, and only a small percentage ended up with me increasing position in stocks that I like at slight lower than prevailing prices. So the vast majority of the time it indeed does provide income (and I require regular income because we live off of investment returns ONLY, no social security yet, and no pensions ever).
Yep. But I sometimes do real-life experiments using a single contract before I move on to trades of quantity. The other issue is that if you’re tracking an option through expiration, seems like all the data about that option disappears after expiry. If you actually own (long or short) a single one of them, the salient information remains, all the trades and the disposition of it is shown clearly in the account.
Either you are lucky or you are way too conservative. I aim to get around 55% to 60% of trades only profitable. I am more willing to close trades quickly when they are moving against me and I am trying to close trades as they hit my target profitability or price action, not worried about extracting the last penny. Reducing the exposure, risk and keeping margin capacity are important.
Bill Ackman to the rescue!!!
