/biz/ - Business & Finance

>>15082488
>good idea to use options to buy biotech catalysts or a bad idea? Asking for a friend

The strategy does lower your costs basis and slightly reduce risk by capping your upside. You have a higher probability of a win on the trade. It's a good strategy with a similar risk profile to selling covered calls.

You want to look for underlyings which are high volume, tight spreads and high relative IV. If you are looking to invest and hold on assignment pick quality names with rich P/FCF and solid fundamentals or you will suffer from the consequences of making poor investing decisions.
"Biotech catalysts" sound a bit like you might be looking at small cap / speculative names so take care. The larger the account size, the more often we will tend to look at trading indexes and large cap.

We like to use the income from puts as an alternative to dividends and when we're not interested in acquiring assets at the current spot price we short OTM at the 20-30 delta range.

Do take note of the additional assignment fees from your broker which can add up.


For more info see:
https://www.optionsplaybook.com/option-strategies/short-put/

A slightly more advanced strategy is the Poor Mans Covered Put:
https://www.tastytrade.com/tt/learn/poor-man-covered-put

Good question and good luck with trading!

Tomorrow's Plan, August 01
1) Close some VIX calls for profit.
2) watch the indexes for high enough IV to short strangles / straddles
3) don't see any interesting earnings plays

What Are Your Moves Tomorrow, August 01?