Using The Market Maker When Selling Put Options – BMO Stock – Dec 4 2014

Bank of Montreal Stock (BMO) continues to be under pressure and looks ready to break through the $80 support level. Investors are obviously upset with the revenue in the last quarter and believe the outlook for the upcoming year is not better. Many believe a lot of the Canadian Banks have topped out and will move lower into 2015.

Yesterday I sold the $79 put option for Dec 20 expiry on Bank of Montreal. Today the stock is lower , yet the spread is not and in fact is less. Why does this happen and how can an investor use this to their advantage when selling options. This is an opinion piece and I know a lot of market makers will disagree with me on this, but this has been my experience and here is how I use it to my advantage.

Understanding how the market makers price options can go a long way toward safety when selling options, buying options and setting up spreads.

The focus of this strategy article is on Put Selling, although the tips in this article can be used for any option trading. This article is for FullyInformed members

Using The Market Maker as another Put Selling tool

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Disclaimer: There are risks involved in all investment strategies and investors can and do lose capital. Trade at your own risk. Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed and presented are financial or trading advice or recommendations. Everything presented and discussed are the author’s own trade ideas and opinions which the author may or may not enter into. The author assumes no liability for topics, ideas, errors, omissions, content and external links and trades done or not done. The author may or may not enter the trades mentioned. Some positions in mentioned stocks may already be held or are being adjusted.