mikede,

I put a lot of the educational material in the static (upper) part of this site. Now that I am in the process of reactivating the TraderWizard.com site, I intend to set that one up for education (and sale of my book), and keep this one for current info only. I'm awaiting an agreement from my publisher to assist because I no longer have the time to edit so much material and keep it current.

Re Micron puts, for much of March you could have sold the MU=SM (July 11's) for 50 cents or more. They are presently 35 cents.

Typically, I only go out from 1 to 4 or 5 months when writing puts. I make the decision on the basis of my assessment of the probable cycle duration and amplitude. That's a very subjective thing.

Typically, also, I only write puts after a period of price weakness in the underlying stock that doesn't quite come down to the price where I want to buy the stock. So, I'll write the put and wait until the cycle proceeds. At the top of the next daily price cycle, I may buy back the put or I may wait til it expires. If I think the following daily price cycle low might offer that attractive purchase price, then I'll probably buy back the put, and apply the gain to the next purchase of the stock.

Going back to my example, by taking in a 50 cent premium with 4 months time to expiration on the 11 puts, I was essentially ready to buy in (by having stock put to me) at an effective cost of $10.50. I never expected to see the stock below 11 during those four months, so I was really expecting to earn that premium, which would reduce my ultimate cost by 50 cents. If I had bought stock today at say 11.95, my cost base would have been 11.45, down near the previous (and long-term) cycle low.

There are all kinds of effective options price analysis software on the market, and there are expert options advisors available to you. In my case, what I do and what I write in this blog are my decisions, but ones I keep separate. The writing is intended to initiate thinking and discussion.

bdtobias,

In a new bull market, I would probably go 5 or even 6 months out because I wouldn't expect the stock to be put to me. In real choppy (nervous) markets, the time frame is usually 1 to 3 months.

The point is that the decision is quite subjective, and depends really on how badly I want to own the stock. If I really want to own a stock, I'll go out further, and write more puts. I don't consider the extra risk as much as I am thinking money management.

After my poke in the ribs today with Micron (MU), you could have purchased the stock for well under $12. In the after-market, it's $12.54.

I could see this one coming a mile away.

JogyP, that was a neat +5.0 pct gain in a couple hours. But, it wasn't my advice. Not being a registered advisor, I cannot give out investment advice. Today was merely another case of me pointing out info to readers and, in this case, you deciding to take the risk. You saw the risk:reward ratio was in your favor and you put on a trade that worked out. I'm happy for you, and for other readers who are learning how to trade effectively. I just don't want anybody saying that I do anything here more than giving out education, information, opinion and facilitation services, which I am legally entitled to do.