Smart money has a plan and waits patiently to act on the plan. In fact, smart money probably has several plans to deploy once the right conditions are met. They buy when people are most fearful and sell when things get frothy.
Personally, I do not advocate selling Put options to purchase stock cheaper. The reason for this is that I’ve seen stocks trading at $90 that sell down to $75 and unfortunately keep going down (to $20). This is exactly what happened to CSCO in late 1999 and early 2000. In fact, CSCO made it all the way down to single digits. I believe one of the keys is to let the blue chip name settle at a new, lower price level.
Conclusion
Formulate several possibilities in the market and map out what your actions will be when those conditions are met. You may not pull them off without some growing pains, but you’ll be behaving like a pro and earning very valuable emotional wisdom around your financial decisions.
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