I am a long-time stockpicker, but relative noob in the options world. I am hoping some more experienced options Fools can give me a bit of advice on this one..
When selling out of the money puts, how do you determine how many puts to sell (how to size the position)?
I am looking at a stock I really like right now with puts that have a breakeven price 15% below current price with two months left until expiration. I am wondering how to size the position though.
Is the best way to think about it to take how much stock I would normally buy, and divide by the strike price *100? Then, short that many number of puts?
The only problem I see with that is the overall impact on my portfolio would be small. even though the annualized return on the trade is very attractive. Seems like there might be a better way to think about this?
I would very much appreciate any help Option Fools can give me!