Selling Put Options For A Living

An exercise in selling puts.

Selling put options for a living.

Selling a put obligates you to buy shares of a stock or etf at your chosen short strike if the put option is assigned. In this article i ll talk about how to either make a living or supplement your income by selling put s for a profit. By selling put options. Naked puts are options trades in which you sell the right for another investor to sell put a certain stock to you at a specific price strike price if the stock falls below that.

Yhoo current market price 49 70. In my last post i explained how selling put s can be used by the conservative investor to buy stocks at a lower price during almost any market conditions. A quick primer on options may be helpful in understanding how writing selling puts can benefit your investment strategy so let s examine a typical trading. Trader wants to own 100 shares of yhoo if price goes down to 49.

Sell a 49 strike put. Short puts may be used as an alternative to placing buy limit orders. You can read that story to better understand how selling a put works. It is best to sell puts and calls if you want to make a living by trading.

For example let s say you wanted to make a quick trade in vxx. With the goal of living off dividends i can increase my income and reinvestable capital by successfully writing put options for income. Pitfalls of selling stock options like naked puts. One of my favorite option strategies is a very simple trade that generates portfolio income and reduces equity risk it is selling a cash secured put.

Place a buy limit order. First you re able to collect a large amount of option premium. Writing puts for income offers the best combination of risk reward. I do not recommend that traders buy a put or a call option.

Selling cash secured put options. Cost basis 49 if order is filled 49 option 2. I mostly sell out of the money vertical credit spread put options because it provides a substantial amount of protection. Often selling naked puts is a trade of small amounts which over months of constantly selling naked puts against stocks can result in reasonable monthly income however there is nothing worse than selling a naked put for 50 cents and ending up buying it back for 1 50.

By selling the january 28 puts you can bring in approximately 1 06 or 106 per contract. I ll highlight why selling weekly put options is the best weekly option trading strategy to learn. Buy 100 shares of yhoo 49.