Hi friends. Tonight I wanted to mention the dangers of selling puts at or around earning season. I saw yesterday where a fellow put seller wrote that he was selling puts on APOL. These were to be for Nov. He mentioned that with the stock around 49 he was selling the 38 &39 strike. A couple of danger signs flashed for me and I wrote him regarding my concerns.
1. Earnings were to be reported next day (today)
2. The return he was getting was way too high (around 10%)
3. There were 5 1/2 weeks to go and many companies were going to report their earnings
All of these are mentioned as a learning tool. Each one is a flashing light of danger. In order...
1. Earnings are always to be avoided ..Period! Tonight APOL reported and it was not good. They opened today around 49.98 and dropped after the close to 42.10..-7.88--- Folks, Avoid earnings they are trouble!...
2. Any return of over 6% should get your attention. Period! I try to open a position with returns of around 3% and if all is going well then roll up at a later time as the time-decay eats up the premium.
3. This is a long period. Five and half weeks are a long time and add in earnings season and that spells trouble. Never push the time envelope. Time is our biggest enemy. Well I guess you can add in greed. Both are controllable.
Good night.
No comments:
Post a Comment