If you think the stock is going up, why not buy a call option? My standard answer is, “You can do that too.” Think about it. You’ve bought a call and sold a put on the same stock. Why both, or why sell the put? Simply because selling generates income. Buying costs money. It’s a way of getting more cash into your account more quickly. Look at Interdigital Communications (IDC) and Gaylord Container (GCR). There are too many to list.
The only hang-up is this. Many beginners reading this chapter will not be allowed to sell naked puts (a covered put would be a situation where you’re in a short position on the underlying stock) until you have more experience and/or more cash in your account. You see, you have the obligation to perform if the stock is put to you so your broker will require you to keep that amount of money (or 20% plus if you are on margin) on hold until the expiration date.
Selling puts generates income and lets you buy the stock wholesale.
If you are just getting started, you may want to stick to call options. I did and it worked for me quite nicely. But once you get familiar with rolls, peaks and valleys and predictable stock movements, the put option tool gives you a way to truly enhance your income stream. Indeed, you can make twice as much as you catch the stock coming and going.