stan255

Don't you have to buy back the contract to collect the premium?

What happens to your premium if your option was exercised? E.g: You sold a put contract for $0.5 and let's say the stock hit your strike price and your option got exercised. What happens to the $0.5 premium?

As a fundamental investor, I'm willing to own the stock at the strike price because I see it as good value. Unlike other types of traders where they don't want to get assigned because they are only selling it for the premium.

Hey Kim, To me using options to boost your returns sounds like a no-brainer for a fundamental investor. For e.g: Sell a naked put - Stock goes down to your strike and you get assigned. Win for you because you get to purchase the stock at the price you want. If the stock goes up, you get to keep your premium. Either way, you win unless there is a huge news that crashes the stock which is highly unlikely from a probability point of view. What am I missing here? Or as you mentioned, 99% of fundamental investors are purely the buy and hold type?

Most investors are categorized into a few groups such as the technical traders, fundamental investors, option traders, etc. But why don't more fundamental investors use options in their strategy? For e.g: Bob thinks AAPL is fairly valued and he is willing to pay $144 for it. Bob can sell a naked $130 put. AAPL goes up - He has his premium for selling the put option. AAPL goes down - Bob is happy to pay $130 for AAPL because he thinks he is getting a good deal. What do you think?