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Ask Alan #179 Should I Sell Puts or Calls When Bearish on the Market?

Alan answers a question posed by Jorge, who asks:

Hi Alan,
When we are worried about the market is it better to sell in-the-money calls or out-of-the-money puts?
Thanks Jorge.

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It’s the 2nd Wednesday of the month. Time for another original episode of Ask Alan. AA#179, “Should I Sell Puts or Calls When Bearish on the Market?” you can! Become a premium member today, and tune in to the educational power of the complete library!



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About Alan Ellman

Alan Ellman loves options trading so much he has written four top selling books on the topic of selling covered calls, one about put-selling and a sixth book about long-term investing. Alan is a national speaker for The Money Show, The Stock Traders Expo and the American Association of Individual Investors. He also writes financial columns for both US and International publications along with his own award-winning blog.. He is a retired dentist, a personal fitness trainer, successful real estate investor, but he is known mostly for his practical and successful stock option strategies.

2 Responses to “Ask Alan #179 Should I Sell Puts or Calls When Bearish on the Market?”

  1. Jon Alchin February 22, 2021 3:38 am #

    In my opinion, selling the cash secured put is far superior in a bear market and you did not touch on this: Selling the put and getting assigned CAN lower your overall cost basis if it is below your original contract purchase. It is not possible to do this selling covered calls. ITM covered call assignment is very dangerous and you can lose a tremendous amount of upside if the market suddenly reverses into bull. So, I sell barely OTM puts when my holdings decline because when they rise back up I make even more money because of the assigned put.

  2. Alan Ellman February 22, 2021 5:15 am #

    Jon,

    I, also, like put-selling in bear markets. It is one of the approaches we can take to mitigate portfolio losses in declining markets. Here is a link to one of the article I previously published on this topic:

    https://www.thebluecollarinvestor.com/bear-market-concerns-and-our-option-selling-portfolios/

    Alan

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