In this video I cover the fundamentals on selling put options and how to place your order, as well as how much passive income you can expect using this strategy, and the best stocks for this options strategy. 馃敆 Links 馃敆
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馃搱 Fundamentals of Selling Put Options 馃搱
When you buy a put, you expect the stock to go down in value in a specific amount of time, and you only make money if that's the case. When you SELL a put option, on the other hand, you make money no matter which way the stock goes. The person buying the option contracts pays you premium up front in order to enter the contract and as the seller, you get to keep that premium no matter what. Selling puts can be thought of as being a casino owner, you're letting patrons gamble their money, and while they may win, the real winner will always be you! Selling put options is likely one of the most consistently profitable option trading strategies but it isn't completely risk adverse. When you sell a put option, you're signing a contract to buy 100 shares of the underlying stock at the strike price, but only if the share price comes below this. At which point, the buyer on this put option can execute the contract, leaving you with your premium and 100 shares of the stock. This is why it's important to ONLY SELL PUT OPTIONS ON STOCKS YOU'RE WILLING TO HOLD 100 SHARES OF!! You don't want to be carrying a deadweight stock that you don't believe in, no matter how cheap it might be.
馃搱 How to Sell Put Options 馃搱
Selling put options is pretty simple, it's just like buying a put, but instead you sell it at a strike price you wish to buy the stock at or one you don't expect the share price to reach. Setting your expiration date for the following Friday will result in weekly premium paychecks and these really add up! This month I sold Workhorse options and I received over $400 in premium from a small $1600 investment and very minimal effort. When the option expires, and the strike price is in the money (below your strike price) you must buy 100 shares, which you can turn around and sell covered calls. On the other hand, if the option expires worthless (above your strike price) you are no longer obligated to buy the 100 shares and you can continue to sell another put option expiring the following week, rinse and repeat.
馃搱 Expected Returns from Selling Put Options 馃搱
With put options, you can generally expect, at minimum, 1-2% weekly returns on the collateral you put down. If you have $1000 to sell premium then you can expect $10 per week or $40 per month. With $10k, you can expect $100 per week or $400 per month, and with $100k you can expect $1000 per week or $4000 per month. The more money you have to sell put options, generally, the more money you'll make using this strategy.
馃搱 Stocks for Selling Put Options 馃搱
Whenever picking a stock to sell put options with, you want to pick something that is stable, Workhorse is a bad example of this and I don't recommend it. You can either choose stocks that trade relatively flat such as AT&T or Coca-Cola, or you can pick growth stocks like Amazon, if you have $340k for a single option. Of course, there are some great growth stocks you can pick up for under $100, and the most popular for this strategy would likely be AMD. If you don't have $8500 to put down on an option, some solid picks would be BAC, WFC, or if you want to spice it up, SNAP. These 3 stocks are all under $30 which means you only need $3000 for collateral.
⏱ TIMESTAMPS ⏱
Introduction: 0:00
Selling Put Options Explained: 0:56
How to Sell Put Options: 3:20
How Much $ Does Selling Puts Pay?: 5:50
Stocks for Selling Put Options: 7:19
Discord/Outro: 9:20
馃彿 TAGS 馃彿
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⚠️ DISCLAIMER ⚠️
I am not a financial advisor. This video is for entertainment and educational purposes only. You (and only you) are responsible for the financial decisions that you make.
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