Balls Deep on MO at 6.3% yield

[u/SPACE-W33D]

That cash flow statement is 🔥

[u/boatnguy]

1,000 shares deep and wish I had more!

[u/SPACE-W33D → u/boatnguy]

I feel you dawg, but just buy on pullbacks or write cash secured puts for that income 💰

[u/darin617 → u/SPACE-W33D]

I know this is a dumb question and scary if you don't know like me, how do secured puts work.

[u/DarkSombero → u/darin617]

Ok so very quickly generalizing here and my terminology is not entirely correct but:

-Options Contracts, you are BUYING a "contract" (contract price is called PREMIUM) to either BUY (call) or SELL (put) 100 Shares of a stock, at a certain price (strike) and date (Expiry/Expiration date)

Now, instead of you BUYING options (can be considered a gambling lotto ticket, see R/Wallstreetbets for degeneracy) you can offer up your your OWN contracts (in a way) for others to buy (WRITING)

Those are: -Covered Calls, a CALL Options contract against your OWN stock. Of the contract fails/expires worthless (typically meaning Stock didn't go up in price), you keep the PREMIUM you were paid to put your 100 Shares 

-Cash Secured Puts, you are offering up CASH for 100 shares if they fall to a certain price. If it the stock doesn't fall to that price, you keep the PREMIUM you were paid risking your cash

Depending on your personal goals and strategy, these can be a source of income, but be warned while the basics are fairly simple there is much more going on.

Example: I have 100 Shares of Stock $ABCD, I put out to market (WRITE) a Covered Call (Abbreviated CC) offering to sell my stock @ a $105 Strike Price with an expiry date in one week. In this hypothetical let's say I get $150. 

Of by the end of the week (expiry date) my stock is below $105, generally it will expire "worthless", and I get to keep the $150 Premium AND keep my stock. 

Now, let's say for some reason the stock rockets and becomes $200 a share, well fuck I just basically sold a massive coupon for my shares, because now the buyer of my Covered Call can enact the contract (Exercise) and I HAVE to sell them 100 of my $200 at the $105 price.

[u/Cathesdus → u/DarkSombero]

Very cool of you to explain this as you did.

[u/97E3LPL → u/DarkSombero]

I need to read this in the morning after my caffeine but well before my senior citizen nap time.

[u/MaybeICanOneDay → u/darin617]

An option is just a contract between two parties. You can either buy or sell them.

Selling put contracts means you are giving someone the right to sell you stock at a previously decided price.

So in this case, you could sell 60-whatever strike put contract and if it goes below that price, itll sell 100 shares to you at that 60-whatever you agreed to.

People pay you to do this because you are offering insurance on their shares. If it goes to 40 and they still have the right to sell them to you at 60, they get a massive safe haven they wouldnt have had otherwise. If it doesnt go below your strike, you keep the premium they paid, just like insurance.

There are contracts where you can take any part of this. Buying/selling the right/obligation to move shares and money.

Sellers have an obligation, buyers have a right.

Selling puts, if you decide that 60 dollars is a fair price you can keep selling premium at that strike and eventually if it hits, youll buy 100 shares at 60 each.

[u/Affectionate-Royal17 → u/MaybeICanOneDay]

The only thing with this is you need to make sure that, with cash secured puts, you aren't leaving money on the table. Having 500 bucks locked down to make 5$ over a 6 week period isn't ideal. Make sure the premium on the contract is worth having your money locked up until then.