And this strategy, using simple tools, simple positions, can be repeated every week, over and over again exploiting one or a handful of ideas to put cash in your pocket. This weekly option trading strategy is comfortable for my risk tolerance. Consider these other option strategies for income. Consider that the SPY is $315.00 on July 17, 2020. When you sell a put option, you are agreeing to buy a stock at an agreed price (i.e. Moreover, it lowers your cost to buy the SPY by $400, should the contract gets exercised. Is selling put options for income profitable? For this reason, when selling puts, its always a good idea to have your plan B. You will never lose the income from selling puts. Selling puts generates immediate portfolio income to the seller; puts keep the premium if the sold put is not exercised by the counterparty and it expires out-of-the-money. Overall, writing weekly put options are one of my favorite risk-adjusted ways to earn outstanding returns in the stock market. Selling put options for income can return 48% annually (4% per month) for an average investor or trader. Also, by having a checklist, I ensure that I am fitting the best risk-adjusted opportunities that have a high probability of success. Trading weekly options for income is a proven way to boost income if done correctly. Why Investors Sell Put Options for Income. Put writing generates income because the writer of any option contract receives the premium while the buyer obtains the option rights. The $1 is the income (option premium) that Jimmy gets to keep, no matter how much the beans go up or down in value. Put options enable investors to reduce risk by locking in a predefined contract at a specified price to sell. Selling Weekly Puts For Income. 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 … As I mentioned, 80% of my trading profits are earned from selling put options. I prefer selling puts slightly “Out of the Money,” with an expiration of 3-6 weeks out. Selling put options is a guaranteed way to earn weekly or monthly income, and yes, it can be very profitable, month after month. Generally, options expire on the 3rd Friday of each month. If timed correctly, a put-writing strategy can generate profits for the seller as long as he or she is not forced to buy shares of the underlying stock. You decide to sell a weekly put option with a strike of $316 that expires July 17, 2020 and collect $4 of income (option premium). It expires July 17, 2020, and you collect $400 ($4 a share). In general, the more unstable the markets are, the higher the weekly and monthly income you’ll earn from selling puts. strike price) at a later date. In these cases I usually immediately sell a call at the same strike price, which puts more cash in my pocket. Learn More{{/message}}. Then, you get to collect $400 of income. With both a million rewards points and a million dollar net worth you can live a happier lifestyle. So by selling the option, one collects the premium and produces extra income on top of the dividend the stock pays. A put option is a contract where the put seller must buy an item from the put buyer, at a specific price before the contract expires.  And, you guessed it! What if beans cost more than $10 a pound? How does PUT option work? Yes, you can repeat the trade, again and again, week after week, month after month. Â. How much you earn depends on how volatile the stock market currently is, the strike price, and the expiration date. Weekly put options are financial contracts that expire in weekly increments. Your email address will not be published. Then, you sell 1 weekly put contract, out of the money ($316 strike) that expires July 17, 2020. The strike price is the contracted price that you, the put seller will buy the equity at (stock, or ETF), should the equity be below the strike price at expiration. But in 2019, it’s my favorite one for a different reason. You need to be able to buy 100 shares of the SPY at the strike price (Total $31600.00). In this case, you’ll have to buy 100 shares of the SPY at $316, even though they are worth only $300. Options are time depleting assets and decrease in value each day. Medtronic and generated $372 in income or the opportunity to buy shares at an 11% discount, and; Tesla and generated $4,172 in income or the opportunity to buy shares at a 23% discount; When it comes to selling puts, I’ve developed eight rules that help me maximize my income while minimizing my potential risk. A credit spread (or poor man’s put) offers less downside risk, requires less money upfront, but the reward is less. For example, if you get assigned, you can always start selling covered calls! The standard income-generation trade is selling options that expire in three months and that have strike prices 5% to 10% higher than the current stock … Rather, you’re using the cash and/or margin in your brokerage account as the security. Let’s take a look and see why selling put options actually have a lot of similarities to successful insurance companies and why selling put options …