Looks for high yields on OTM puts by comparing Yield to Strike (YTS) ... Income generation . Options sellers receive money for the obligation to buy or sell the underlying within a specified time. And then the game is over. Access the End of Year Specials for Courses and Memberships HERE, Selling Expiring Options on Earnings, Gaps, News, and SPY. When one of our stocks declines in value, we can lower our cost-basis by selling OTM puts. One way to generate income with puts is to simply sell them outright. Before we begin… Did you know that most traders are always trying to score big… driven by the burning desire to hit it big. I am not covering the pros/cons of being option buyers. If you get a compelling bullish setup, short OTM put options/spreads, stop under support. Follow your Trading Plan for profit targets and trade management. We particularly love selling options — with the charts as always — when volatility is spiked because of news, earnings, selloffs, or other market/stock fear. Premium selling : Probability . For those new to option writing, I suggest you read my Options 101 blog. Enter stock positions at exactly the price you want, and keep your cost basis low. So, a strategy of selling options automatically puts the odds in the favor of the investor. A melting ice cube. Because 90% of traders who buy options without having an edge lose money. Cheap OTM Options, Big Profits: I have postponed answering this question for a long time. Jim Graham. The Short Put Strategy - Selling Puts to Generate Income. An investor always sells either covered calls, where you own the stock, or cash-secured puts, where the cash is ready at hand to buy the stock. This, of course, won’t happen until the stock price drops below the strike price. Karsten wrote that some of the best times for shorting puts are after a big initial drop because really OTM puts are selling for rich premiums since everyone is scared. You don’t need a strong bull market or fast business growth for great investment returns. Your committed buy price is below the current market price. We do this with the use of simple chart analysis, and so can you. Microsoft Corporation (NASDAQ: MSFT) is a good stock to start with.I’d be happy to own MSFT stock … Selling "cash-secured put options" is a PRO move that is easy, safer than buying stock and generates portfolio income. Degrees of OTM and ITM . IF you're willing to own the stock its a great strategy. It gives you a high upside cap, thus allowing you to be bullish, while still giving you downside protection compared to buying at the current market price. Happy trading! One of our favorite patterns is when we get a bullish reversal on SPY after a multiple day selloff to support because premiums have been rising on the selloff. How does one choose which strike prices are considered really rich at these times? So, selling options on the day of expiration is as close to a sure thing in options trading that you will learn. Whether from a bearish selloff or a bullish climactic run higher, we get paid much more for the options that we sell. It is as good or as bad a trading method as any other. It’s a fool’s errand. Sell OTM cash secured puts over and over on stable stocks as long as you can to collect premium. Because of the ease of the strategy and statistical “edge” that exists in selling options around compelling chart patterns, these trades are available in all market environments – trending, choppy, or even a volatile mess. Why place money into a trade that requires a specific move to a specific price? 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