If I want to maximise income while keeping panic at zero, I must anchor my strike price to a value where I actively want to be assigned.
Eg: $Advanced Micro Devices(AMD)$ which is currently trading at USD 559.82 due to high demand wave & big target price upgrade from analysts. AMD has a high IV. This means its options premiums are attractive.
Let's look at USD 480 Strike Price expiring in 30 days. The options market is pricing this USD 480 Put at a premium of USD 15.
I execute a Sell to Open contract.
I collect USD1500 in cash per contract. If AMD plunges & I get assigned at USD 480, my net entry price is USD 465 (480 - 15 premium).
I own AMD at USD 465, much cheaper than USD 559.82.
If the price stays above USD 480, I collect the premium as profit.
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