5 Tips For Selling Options Profitably
Hey guys! In this post, we'll detail 5 key tips to keep in mind while selling options that can massively improve trading results over the long term. Let's jump in.
Selling options has become a more popular strategy lately, due to the fact that traders can control, to some degree, their win rates and R:R setups. If you've followed us for any length of time, you know we're big fans of selling puts.
This is because there are only a few things that most traders and investors care about when they get involved in the markets:
- Returns
- Volatility
- Difficulty
- Repeatability
Selling puts is a great blend of all four.
However, shorting put options to outperform the market is simple, but it's not easy.
Here are 5 key tips to improve your option selling skills:
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1.) Make sure the underlying stocks are high quality. ✅
Selling put options is no different than building a portfolio of stocks.
There's a chance one could be assigned, and it's key that you're ok sitting in a position for a while as it chops around.
Let the edge work.
2.) Avoid selling puts when the VIX is low. 💥
Low 'fear' in the market = cheap insurance.
Low premiums = bad things happening when stuff goes wrong.
3.) Look for stocks that have sold off. 📉
Oversold stocks (that are high quality) are perfect candidates for selling puts.
Unless they are in a brutal downtrend, the recent selloff means there's more fear, which means higher premiums.
It also means a better entry price.
4.) Set a minimum return requirement. 💸
If the puts you're selling don't yield more than the S&P 500 does annually, then why bother?
Make sure that the annualized yield of the puts you're selling total more than 7-8%, and ideally more than 12%.
Compounding is the goal.
5.) Don't use leverage. ❌
Using leverage is a quick way to the poor house if something goes wrong.
It's much better to build a portfolio of positions in cash where no position takes up more than ~3% of exposure.
It can be "expensive" to start, but it's worth it.
--------------
There you have it - 5 key tips for selling options. We hope you enjoyed!
Want to get started with more high-probability trade ideas? Follow us below. ⬇️⬇️
Selling options has become a more popular strategy lately, due to the fact that traders can control, to some degree, their win rates and R:R setups. If you've followed us for any length of time, you know we're big fans of selling puts.
This is because there are only a few things that most traders and investors care about when they get involved in the markets:
- Returns
- Volatility
- Difficulty
- Repeatability
Selling puts is a great blend of all four.
However, shorting put options to outperform the market is simple, but it's not easy.
Here are 5 key tips to improve your option selling skills:
--------------
1.) Make sure the underlying stocks are high quality. ✅
Selling put options is no different than building a portfolio of stocks.
There's a chance one could be assigned, and it's key that you're ok sitting in a position for a while as it chops around.
Let the edge work.
2.) Avoid selling puts when the VIX is low. 💥
Low 'fear' in the market = cheap insurance.
Low premiums = bad things happening when stuff goes wrong.
3.) Look for stocks that have sold off. 📉
Oversold stocks (that are high quality) are perfect candidates for selling puts.
Unless they are in a brutal downtrend, the recent selloff means there's more fear, which means higher premiums.
It also means a better entry price.
4.) Set a minimum return requirement. 💸
If the puts you're selling don't yield more than the S&P 500 does annually, then why bother?
Make sure that the annualized yield of the puts you're selling total more than 7-8%, and ideally more than 12%.
Compounding is the goal.
5.) Don't use leverage. ❌
Using leverage is a quick way to the poor house if something goes wrong.
It's much better to build a portfolio of positions in cash where no position takes up more than ~3% of exposure.
It can be "expensive" to start, but it's worth it.
--------------
There you have it - 5 key tips for selling options. We hope you enjoyed!
Want to get started with more high-probability trade ideas? Follow us below. ⬇️⬇️
כתב ויתור
המידע והפרסומים אינם אמורים להיות, ואינם מהווים, עצות פיננסיות, השקעות, מסחר או סוגים אחרים של עצות או המלצות שסופקו או מאושרים על ידי TradingView. קרא עוד בתנאים וההגבלות.
כתב ויתור
המידע והפרסומים אינם אמורים להיות, ואינם מהווים, עצות פיננסיות, השקעות, מסחר או סוגים אחרים של עצות או המלצות שסופקו או מאושרים על ידי TradingView. קרא עוד בתנאים וההגבלות.