Jerry Lee - Selling Put Options My Way

Jerry L. Lee Selling Put Options My Way

Selling Put Options My Way

How to create a steady stream of income using Put Options.

Jerry L. Lee

Contents

Introduction

Introduction

I must start by telling you that I have no 1-800 number, I am not trying to sell you any products, and am not inviting you to come to my house to view a cleaning agent. I will not try to sell you plastic bowls or any other cant miss ideas. I do not have any life-changing strategies to offer nor do I sell recordings that promise you unlimited wealth, inner peace, or a flat stomach.

I am going to tell you the true story of how I have made a fortune, lost a fortune, and came back from the edge of disaster to prosper in the option market. I started with a modest amount of cash; also, I was lucky as I stumbled into the Internet bubble through accident and ignorance. Other than the school of hard knocks, I have no special talent or training in the stock market. My good and bad trades have been learned the hard way.

I will also tell you how I now invest, and how it might work for you. If you find that it does, great. We both will be winners. I am not writing this book with the hope of making much, if any, money. I am now retired and healthy, golf several times a week, have a loving wife, two great daughters, and two good guys for sons-in-law. We are also blessed with four healthy grandchildren and sponsor a child in Mexico with whom we enjoy trading letters and pictures. Life has been very good to me, and giving some back will be my reward.

I also am not a certified financial planner and only hope that I can convey what has worked for me. Once you read the book and start your own financial journey, I have no control as to whether or not you will follow my ideas. Your results might be different from mine. I hope better but maybe not. You alone must make the decision whether this strategy will fit your investment goals.

Read the book several times. I hope that each time, it will become clearer. You may find the material confusing the first time you read it and it may sound like a new language. However, each time you go through it, you will better understand my ideas and rules for trading options. My style is not the only way to trade options and these ideas are definitely not the only way to sell puts. My methods are a way for the average investor to sell puts with some rules and guidelines.

You will not need to learn the Japanese Candle Stick chart system or other unusual tracking methods. Just a few simple things to check each month, then make the trade and pocket some free money.

CHAPTER 1

I started utilizing options in the mid 1990s with approximately $150,000 in my account. At this point, you might be thinking, Sure, $150,000. Anyone can make money if they have that much to start with. However, the other side of that equation is that anyone can also lose money if they have that much to start with. Keep in mind that this money was also my familys entire retirement nest egg. This had been saved by investing in some small apartment buildings and by working two jobs for thirty years. I had also received some accumulated vacation pay upon my retirement as a captain from the fire service. During our working life, my wife and I had economized and not wasted money. Over the years, as our savings grew, we did not rush out and buy new cars or other toys. That came later.

I then entered the investing arena with little or no knowledge of its workings. I tried a few stocks that friends had mentioned. The friendships worked out fine, but the stocks never seemed to do nearly as well as the friendships.

At some point in late 1996, I was introduced to the possibilities of trading options. I jumped in and went for quite a ride.

With my lack of investing knowledge, I was cautious at first, but then money started flowing into my account. Stocks like Amazon, Dell, Microsoft, and others so-called Internet stocks just would not go down. These stocks seemed to split and double once or twice a year. Money really seemed free then, and within two years, my account had grown to over one million dollars. Officially, I was a millionaire.

I was taking the whole family for trips to the Caribbean and Mexico, and we were staying at rented villas on the beach. One time, we could not find flights that fit our schedule, so we gave some serious thought to chartering a corporate-style jet.

During this free-money ride, I had become a contributor to an open web page forum on options. I was getting a hundred or so emails monthly asking for opinions, ideas, and next great plays. I decided to surprise my wife with a new car and went to the local Mercedes dealer where I ordered a new S-500 for $92,000. When asked how I wanted to finance the car, I casually said, I would write a check, of course. A month later, I also bought a new Suburban and paid $42,000 cash for it. Only eight years before this, we were driving a $150, 1962 Rambler as our second car. My, my, how things had changed!

My account had now increased to about two million dollars in just four short and very fast years. These were heady times for sure. There was free money everywhere I turned.

I was a retired firefighter captain with a couple of years of college courses, but I had no official degree. By accident, I had found my niche in the financial market place. I was bulletproof, so I was taking chances and making wild options plays. Then, in late 1999, I started hearing the phrase, Internet bubble. Yeah, sure. Didnt the naysayers understand that this was a new paradigm with no end in sight? I was seeing older traders on TV interviews saying, You young guys havent been around long enough to see a down market. My thought was, Get the old codger off the TV and show me some more options. When I look back, I was so full of myself, but damn, it was fun!

Then 2000 came along, and it seemed that a few of the Internet stocks had slowed their growth rate. Not to worry, the upward movement of the NASDAQ during the late 90s had not been just a straight line up! There had been times when stocks moved down some, but then went right back up on the correct path. Therefore, as a downward trend started, I failed to recognize it. Failed to recognize it, hell! It was slapping me in the face, and I still flat out ignored it!

I will show you later how I could have prevented the devastating results of 2000-2002 to my account. However, at that time, I still felt bulletproof. I had no rules or experiences to fall back on. When I look back, I was so inexperienced that it surprises me that I kept any money at all. I was selling puts and using the entire margin that my brokerage would let me use. I was still picking strike prices at, above, or very near, the current price of these Internet stocks. Surely, these stocks would turn around and bail me out. Then the famous (well, famous is not the first word that comes to mind) margin calls started. I think my brokerage had my phone number on speed dial. I was forced to liquidate position after position and my account balance was plummeting. By late summer, my account had dropped to approximately $750,000, so I had lost about 1 million in six months! Hmmm, I wondered if I could buy that 1962 Rambler again.