Some of the best stocks for selling options during a bear market are value companies that pay good dividends. A lot of what I discuss in the video below still holds true today. The seven stocks I mention in the video are affordable and do pay good dividends. Since April, the market has hit deeper lows but has bounced back in July. All seven stocks are still great for selling options.
You might be wondering if we have hit bottom? I do not think so. With the FED raising interest rates next week I do think we will be heading lower in the coming weeks. My opinion is that we might drop another 10% from here. No one really knows the timing of the bear market. In most cases we know weeks if not months later. Another opinion of mine is that we will come out of the bear market in Mid to late October.
How does my options about the market impact my trading? Well like in the video I am going to continue trading in value companies that pay great dividends. One thing I have changed since the video is that I now have different Delta goals for Calls and Puts. I am still using a 20 Delta for Calls and now a 10 to 15 Delta for puts. Or another way to say it is that I am taking less risk with selling put options.
If you are new to Delta I like to use it as the probability that a stock price will meet or exceed its strike price. With a twenty delta it has an 80% chance of hitting the strike price. Simply subtract the delta form one hundred to get the probability. Below is what Delta looks like on a Schwab option chain. If you would like to learn more about Delta and the other associated Options Greeks you can take a look at my post The Option Greeks.
Another change since April is that I am dispersing my option expirations. This way I do not have too many contracts expiring at the same time. I try to not have more than 2 or 3 expiring on a specific Friday. I can better handle managing my “In the Money” positions and better manage my cash and margin in my accounts.
If you have not watched the April video, then I encourage you to take a look. The seven companies are all still good investments today.
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Thanks for taking the time to read my Post!
Uncle Jim