How Selling Puts Can Give You a Better Entry Price

During their recent episode of the Value Options Letter and Acquirers Podcast, Travis and Carlisle discussed How Selling Puts Can Give You a Better Entry Price. Here’s an excerpt from the episode:

That opens the door, Toby, for us to sell some of our puts. You might have a stock at 83 that’s already cheap and trading at a discount, but maybe you’re able to sell puts at 80 or 75, 45, 60 days out and collect double digit premiums.

If stuff really hits the fan and rates keep going up and the stocks get hit by a big sell off, you might end up getting exercise, but it’s going to be a heck of a discount to what it would be now and historically on the multiple basis. That’s one of the nice things about options is that you really can manufacture your entry price more so than when you’re just buying the stock outright.

[Tobias] I like the way you framed that up. That’s one of the things that we think distinguishes this service from the other ones where we look at the outcome if you put the stock, so we only do it in stocks that you want to own, or if the option expires worthless, then you get a pretty good return on the option too, rather than just looking for the options with the highest premium and trying to make the money on the option side. That’s why it’s value options.
We’re trying to find good value positions to do it in so that if the stock gets put to you, it’s a good outcome. It’s not a bad outcome at all.

[Tim] Very much agree.