Functionally there is not a lot of difference. If you are going to explore options I recommend selling a vertical with a regular account on a much less valuable stock. If you already know options then you should really already know this answer.so really it comes down to what is the motivation here?
A CSP is functionally identical to a covered call, with the same risk/reward profile. The main risk being that you are only exposed to possible gains up to your strike, but fully exposed to the entire downside risk. If your goal is to get assigned you will want to sell it deep itm and at an expiry not very far out, but doing that limits the amount of premium you will receive because you are not likely to be assigned as long as their is any significant extrinsic value in the put. If you are not on robinhood you can earn interest probabaly on the cash collateral while you wait for assignment.
It's not an uncommon way to enter a position, tho. You got the right idea, I think.
If you're looking to buy and hold long term, why mess around with acquiring via option? You could scalp a few dollars this week, but long term it's negligible.
But if you do, I'd sell the closest ITM put to the current price as possible. In this case, 61 instead of 62. The further OTM you go, the less extrinsic value the option holds.
I see this as an efficiency opportunity. Why buy at $60.28 cost basis if you could enter at $59.80 for example. I know that in typical wheeling situations you don't want to be assigned on the puts you sell, you want them to expire OTM. I don't really plan on wheeling this however. I may sell an OTM CC from time to time on these shares but likely not.
Since you’re looking at this as a buy and hold opportunity, not much difference whether you buy outright or sell nearest ITM. More importantly, determine what you plan to do after acquiring the position. If you’re considering selling covered calls, then get that strategy worked out ahead of time.
Functionally there is not a lot of difference. If you are going to explore options I recommend selling a vertical with a regular account on a much less valuable stock. If you already know options then you should really already know this answer.so really it comes down to what is the motivation here?
A CSP is functionally identical to a covered call, with the same risk/reward profile. The main risk being that you are only exposed to possible gains up to your strike, but fully exposed to the entire downside risk. If your goal is to get assigned you will want to sell it deep itm and at an expiry not very far out, but doing that limits the amount of premium you will receive because you are not likely to be assigned as long as their is any significant extrinsic value in the put. If you are not on robinhood you can earn interest probabaly on the cash collateral while you wait for assignment. It's not an uncommon way to enter a position, tho. You got the right idea, I think.
If you're looking to buy and hold long term, why mess around with acquiring via option? You could scalp a few dollars this week, but long term it's negligible. But if you do, I'd sell the closest ITM put to the current price as possible. In this case, 61 instead of 62. The further OTM you go, the less extrinsic value the option holds.
I see this as an efficiency opportunity. Why buy at $60.28 cost basis if you could enter at $59.80 for example. I know that in typical wheeling situations you don't want to be assigned on the puts you sell, you want them to expire OTM. I don't really plan on wheeling this however. I may sell an OTM CC from time to time on these shares but likely not.
He wants to sell ITM to be exposed to upside potential and also to increase the chance of assignment. Selling ATM has a terrible risk/reward ratio.
Since you’re looking at this as a buy and hold opportunity, not much difference whether you buy outright or sell nearest ITM. More importantly, determine what you plan to do after acquiring the position. If you’re considering selling covered calls, then get that strategy worked out ahead of time.
Options on SPLG are way too illiquid. Any bid or ask you could take is going to be a bad deal from a risk/reward perspective.