Michael Shulman, Expert Trader, Analyst and Educator

Michael Shulman, Expert Trader, Analyst and Educator

Do you know what “the chase” is?

Nope, it’s not a movie, video or song. It’s a put-selling tactic you can use to generate cash from a rising stock without owning the shares.

Let’s say you want to buy a stock right now, and it’s trading right around $28…

Take a breath: Maybe you can do better selling puts and chasing the stock rather than owning the shares. Why not sell a $28 put—just in case you’re wrong about that entry price—and get a discount to the market by simply waiting a few days?

The Weekly PutHollyFrontier (HFC) is a very good independent refiner that’s been hammered along with other refiners due to market concerns about rising feedstock prices and falling crack spreads or operating margins.

If you have a longer-term view, it’s worth more than $28, roughly the current stock price. So, if you agree and want to buy it, do so.

But if you want to generate weekly cash and have more flexibility, you sell the $28 put for this coming week and pick up between $0.70 and $0.85 in cash.

If the stock goes below $28, you roll the put down or accept shares and turn around and sell calls, generating more cash.

If the stock closes above $28, well, sell another put. Just keep that cash coming in.

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