I have a couple thousand shares of Apple that I do not need to sell for a few years and I was wondering what your thoughts were on Using a third-party company affiliated with Ameritrade too I guess dabble in options in order to create some more value. But the biggest question is the risk. It appears that I can make around five or 6% by doing this so it appears that may be there is not a whole lot of risk. What are your thoughts
Puts selling is bullish strategy. The only risks will be facing implied volatility explosion, and possibly become a bag holder should the stock tanks. I think that selling AAPL puts makes much more sense because (1) IV at AAPL is still high and (2) AAPL seems to be at least has found a footing after the prolonged drop. AMZN is in a very different environment. My research shows me that AMZN is about to roll over, so selling puts here at $253 area can make you a bag holder perhaps for a very long time. I have been selling AAPL puts with pretty good success because it bounces up everything time I sold and close out a day or two later. AAPL is a stock I don't mind owning. AMZN on the other hand, is a very different stock in a very different environment in which not very favorable to puts selling.
I think what JC is saying is that the current environment, where implied volatility is lower than historical volatility, does not make for a good time to write puts. However, I think there's always ways to generate the type of income you're talking about with options with very little risk.