Option Strategies For The Value Investor – Part I (Writing Put Options)

In this first post, I present my favorite option strategy – Selling Put Options. Yes, I am talking about options on a value investing website. Please read on and I am sure you will find it interesting. I will follow up with more posts on other option strategies for a value investor if there is an interest.

Often times when I like a company and want to purchase some shares, the stock is trading a bit higher than where I would like to buy. I could do several things here

1) Just wait patiently till the price comes in my buy range.
2) Place a limit order to buy the shares at a lower price.
3) Buy some shares now and add more as the price moves down OR
4) Sell puts on the shares at a lower strike price.

Read the rest of the article on GuruFocus.

About Adib Motiwala

Portfolio Manager at Motiwala Capital LLC
This entry was posted in Option Strategy. Bookmark the permalink.

2 Responses to Option Strategies For The Value Investor – Part I (Writing Put Options)

  1. Jeff says:

    While the strategy has merits, a sometimes important difference vs. a limit order is that before expiration the stock may trade through your desired limit order price and then back up. Thus you risk situations where you would have been filled with a limit order but you’re not with a short put position.

  2. adibmoti says:


    thanks for the comment. I agree that there is the risk that you may not get the shares using the put versus a limit order. However, in the case that the stock trades down below the put strike price, you will not only get the shares but also at a lower price. I actually use a combination of writing puts and buying some shares outright using a market order. I usually like to buy in parts and hence I buy some shares when I find them reasonably attractive. Then, I may also write some put options that may potentially get me shares lower than the current price.

    The other risk with writing puts is that the stock has a sharp run up before the puts expire. That is why I prefer buying some portion of the total allocation outright.