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No. of Recommendations: 4
From what you’ve shared, yes, it looks like an options strategy that relies on selling puts.

I wouldn’t call it dependable or guaranteed income. You can make money at it if all goes well, but there are a few challenges. Off the top of my head:

1) If the market moves against you, all that ‘income’ (or even more) can quickly evaporate as you’re forced to buy the stocks behind he options you’ve sold. If the company itself deteriorates, you could be stuck with a huge loss relative to the ‘imcome’ generated.

2) Unless you’re starting with a really big nest egg, you’ll probably need to keep much of the cash you generate in your account to protect against margin calls or retain the cash coverage to secure the puts.

3) Options typically require you to work with 100 share lots. That suggests either a pretty decent starting nest egg or an overly concentrated portfolio.

4) It’s not guaranteed or dependable income by any stretch of the imagination. If anything, it’s like being an insurance company. Much of the time, you could wind up okay, but you’d better have deep pockets for the times when things don’t go your way.

Regards,
-Chuck

Discovery/HR Home Fool
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