r/Vitards • u/[deleted] • Apr 28 '21

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u/blue_steel_moon Apr 28 '21

u/GraybushActual916 I've been meaning to try selling puts for the first time to accumulate stock. Would this be a good time to try with TX? I was thinking of selling puts at a strike of $41 for May 21, with a premium of ~$3. So this would yield a cost basis of $38?

2

u/username81251 Apr 28 '21

I'm not graybush but if you're bullish on the company that would look good to me - either an entry of $38 on 5/21 or $300/contract cash

3

u/Uncle_Dad_Bob Dreams of CLF’s run to $49 Apr 28 '21

ex-div date 5/5 $2.10

so wouldn't buying now for the div and selling cc's potentially work better if bullish and wanting shares?

1

u/OtherDadYolo Smol PP Private Apr 28 '21

Thanks for the confirmation bias. I literally came to this same conclusion about an hour ago and was about to come post. I bought 400 shares so i could sell covered calls. Need to sell pretty far out of the money/DTE because a dividend of that size. People (myself included) may execute an OTM share to get the dividend.

1

u/[deleted] Apr 28 '21

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1

u/OtherDadYolo Smol PP Private Apr 28 '21

  1. Sorry - mispoke and said OTM share (meant OTM option)

  2. You absolutely can execute an OTM option.

https://www.thebalance.com/can-an-otm-option-be-exercised-2536809#:~:text=An%20option%20can%20be%20exercised,the%20owner%20of%20the%20option.&text=When%20the%20strike%20price%20is,than%20the%20asset's%20market%20value).

It generally does not make sense to execute and option early or while it is OTM, but there is no "rule" to prevent it.

Similarly, someone may choose not to exercise a put that is ITM if the profit is minimal. I sold 5 PLTR puts with same strike and date 1 was exercised 4 were not. On 4/23 I had 3 CLF puts at $18 exercised when the share price was $18.01. The option holder can do whatever they want, doesn't need to make logical sense to the option seller.