Nasdaq-listed heavyweights Alphabet (GOOGL), Amazon.com (AMZN), Apple (AAPL), Facebook (FB) and Microsoft (MSFT) have been the drivers of the momentum in the Nasdaq Composite. At the time of writing, the Comp was up 17%, while the S&P 500 and Dow Jones Industrial Average were higher by 8.9% and 7.3%, respectively.
“Stocks like Apple, Facebook and Google are not just a U.S. story, but rather a global technology and consumer one,” Luke Rahbari, CIO of Stutland Volatility Group and Equity Armor Investment, said.
For investors that missed out on the year-to-date performance in stocks like Alphabet, but would be willing to buy at lower levels, Rahbari recommends selling puts rather than just sitting on cash waiting for a selloff that may never come or take several months to play out. The two main reasons to employ this strategy are:
- Potential source of income generation; and
- Stock replacement.
Since selling a put places you in an obligatory position of taking ownership of a stock, consider only selling a put if you are comfortable owning the security at the predetermined price, should it indeed be put on you. If the sold put expires without exercise, the seller keeps the entire premium.
“Instead of always having cash on the sidelines, I can pick a price that I am willing to buy the stock and collect some income,” Rahbari said. “Even if I don’t have the opportunity to buy the stock lower, at least I am earning monthly income rather than collecting nothing in cash.”
To hear more on Rahbari’s strategy for selling puts on Alphabet, be sure to check out this TradeTalks interview with Jill Malandrino from the Nasdaq MarketSite.
What to learn more? Contact email@example.com for more information
Follow Nasdaq on Facebook and Twitter @Nasdaq
Follow Jill Malandrino on Facebook and Twitter @JillMalandrino
Neither Nasdaq, Inc., its subsidiaries and affiliates (collectively, "Nasdaq"), nor any of the Nasdaq third party providers ("Third Party Providers") nor any of these entities’ officers, employees, directors, or agents makes any specific promises with respect to the Nasdaq products and services including guarantees of accuracy, uninterrupted or error free service. Additionally, Nasdaq has not passed on the merit of nor has it endorsed any of the securities or information. The information contained herein is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice, either on behalf of a particular security or an overall investment strategy. ADVICE FROM A SECURITIES PROFESSIONAL IS STRONGLY ADVISED.
Because of the possibility of human and mechanical error as well as other factors, neither Nasdaq nor the Third Party Providers are responsible for any errors or omissions by either Nasdaq or the Third Party Provider. All products, services and information ARE PROVIDED “AS IS” WITHOUT WARRANTY OF ANY KIND. Neither Nasdaq nor its Third Party Providers make any representations or express or implied warranty and both Nasdaq and its Third Party Providers disclaim all warranties of any kind including warranties of accuracy, timeliness, completeness, merchantability, or fitness for any particular purpose. Neither Nasdaq nor the Third Party Providers shall have any liability in tort, contract, or otherwise (and as permitted by law, product liability), to user and/or any third party and in no event shall Nasdaq or its Third Party Providers have any liability for any lost profits or special, incidental, punitive, indirect, consequential or direct damages, even if notified of the possibility of such damages. Some U.S. states and foreign countries provide rights in addition to those above or do not allow the exclusion or limitation of implied warranties or liability for incidental or consequential damages. Therefore, the above limitations may not apply to you or there may be state provisions which supersede the above. Any clause of this Disclaimer declared invalid shall be deemed severable and not affect the validity or enforceability of the remainder.
© Copyright 2017, Nasdaq, Inc. All rights reserved.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.