5-Second Option Strategy for the Beginner: Buying Stock by Writing Put Options

In the world of the small speculator, options are used, customarily, in an attempt to capture large gains with little capital investment. One way to use derivatives in an investment operation, however, is to write put options for an issue in which you want to build a position. Famous investors such as Warren Buffett have been known to use this trick to lower the overall cost basis of their portfolio, generating higher returns over long periods of time.