Selling PUT Options For Income
So you’re probably wondering what are PUT options and how do you sell PUTS for income right?
I’m putting this little guide to selling PUTS to teach you how to sell PUTS without owning stock!
WOW!? I can sell PUTS without owning stock and make money without even buying shares?
That’s NOT INVESTING! THAT’S A SCAM!
While many believe the market to be a scam, it’s simply just misinformation, misguidance, or not educated enough!
I am here to CHANGE WHAT YOU DON’T KNOW!
Selling PUT options for income does come with some risk. But in reality, this is probably what you need to be doing as a beginner or advanced investor. PUT options actually make you money for sure, without ever owning or buying stocks and shares.
To put it in simple terms, get it, to put!
All seriousness, a PUT option is a contract between the seller or in other terms, one who is shorting the PUT with a buyer who owns the shares of that stock, ETF, or whatever the PUT contract is being placed on.
The PUT option seller agrees to purchase a stock at an agreed-upon price.
You will often hear investors and traders talk about selling premium. That’s another term for shorting PUTS. We call it that, because a PUT option is an insurance asset or strategy for those who buy them for their shares. They protect the owner of the shares, in case the stock drops. The investor buys a PUT option at a certain strike price, so that they can sell that stock, or their shares, at that strike price in the future if the price declines.
Are you still following?
So, as a premium seller, you are selling that insurance to the buyer. Think of it as a car owner. We all pay premiums on our car insurance each month. If there happens to be an accident, you call your insurance agent up, make a claim, and go from there.
They either cut you a check for the damages to be repaired, or deem it as a total loss, and cut you a check for the transfer of the car ownership from you to the insurance company.
So each month, PUT buyers are buying insurance on your shares, or the stocks you own, and PUT sellers are taking in premium.
If the stock price drops to that agreed strike price, the PUT seller has already taken in the premium which they keep, but now the difference of the price is factored in, and they take the shares, or stock off of the hands of the owner who had bought the PUT contract.
Writing PUT contracts can be risky. It involves risk. Its risk is when the stock price drops, and you have to own the shares. Depending on the drop, or decrease in value of the shares, determines whether or not it was a good investment. If you are PUT the stock, 100 shares equal 1 option contract, then you can then start writing covered calls.
PUT selling for income is a great way to earn monthly income as you can see, if you’re already looking to buy a particular stock, and at-least 100 shares, THEN SELLING A PUT OPTION on it just makes sense!
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Good luck in this new adventure, and I look forward to seeing you succeed!
How To & Tips
- Sell (OTM) Out Of The Money PUTS
- Sell When IV is High (Compare IV Rank)
- Sell PUTS When Bullish
- As Implied Volatility drops, so does the price of the option
- When this happens, you can buy back the option for less than you sold it for, creating a profit!
PUT Selling Book
Here’s my go to for beginners, for put selling for income.