Using Basic Technical Analysis
to Sell Puts

When to Sell Puts, When to Buy Them Back

Consider this a sequel to my earlier article, How to Use Technical Analysis to Sell Puts . . .

So there's this cool scene in Season 5 of "Hell on Wheels" (about the construction of the Transcontinental Railroad following the American Civil War) where President Ulysses S Grant and the show's primary protagonist, Cullen Bohannon, are sharing a quiet cigar and flask of whiskey by a campfire.

The Union Pacific and Central Pacific Railroads along with President Grant and Mormon patriarch Brigham Young are meeting to hammer out a final route and terminus to connect the two railroads in Utah.

Bohannon finds himself in a unique position of influence - and pressure from three different sides to use that influence.

Grant understand's Bohannon's predicament and offers his perspective:

"I know two songs, Mr. Bohannon. One's Yankee Doodle, and the other one isn't.

"Keep things simple, that's my advice."

Keeping Things Simple When Selling Puts

I don't want to oversimplify things - because we do look at multiple factors when setting up and managing our short put trades inside The Leveraged Investing Club.

But at the same time, one of the great things about selling puts is that it's a very easy to understand trade.

And sometimes it's super simple to understand what to do and when to do it.

Case it point - I closed out a short put position on KO for 20.43% annualized returns over 17 days.

Back on 2017-02-10, with KO trading @ $40.91/share, I sold a single March 17 2017 $41 put.

17 days later, with the stock trading @ $41.70/share, I bought it back for a lot less than what I paid for it.

Here's a chart I put together to show you how and why the decision was an easy - and lucrative - one:

(Click on image to enlarge.)

Again, technical analysis is only one thing we look at, but still, it's not that hard either - sell puts at support, and buy them back at resistance.

I won't enter a trade myself unless I know I'm the one who's ultimately in control of it (not Mr. Market)

It's simple - either I'm right ("Yankee Doodle") and I make easy and lucrative returns.

Or I'm wrong (not "Yankee Doodle") in which case I employ my 4 Stage Short Put Trade Repair Formula and fix the trade so that I still walk away with decent to good returns at the end of the day.

Either way, I win.

Or as I like to say, "Heads We Win, Tails Mr. Market Loses."

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Warren Buffett Zero Cost Basis Portfolio Current Equity Holdings:

KO - 125 shares
KMI - 100 shares
BP - 100 shares
MCD - 30 shares
JNJ - 25 shares
GIS - 25 shares
PAYX - 25 shares

Open Market Purchase Price: $20,071.83

Less Booked Option Income: $16,341.71

Tot. Discount: 81.42%
Adj. Div. Yield: 19.59%