Wondering what’s the best strategy for selling put options? Retirement is a subject that is on the minds of pretty much everyone; one day, we all hope to have enough assets saved up so that we will no longer have to work. Of course, accumulating assets for retirement is only half the story. Once we …
Selling Put Options
Put options give the holder the right to sell a particular stock at a set price within a specified time period. So, when an options trader sells a put option contract, they are agreeing to buy the stock at the strike price if the option is exercised by the holder.
There are two key reasons why someone might sell put options:
- It can be a way to generate income.
- It’s a way to acquire a particular stock at a lower price than it’s currently trading at. If the stock price falls below the strike price, the trader will be obligated to buy the stock at that price.
No matter what happens to the price of the stock at expiration, the trader gets to keep the option premium.
When writing put options, the biggest risk is that the stock price falls sharply and the trader will be obligated to buy the stock at a much lower price than it was when they sold the option. This can lead to paper losses, especially if the stock price falls far below the strike price. For this reason, it’s always best to sell put options on quality stocks that the trader would want to own.
Are you thinking of selling put options for weekly or monthly income? If so, you came to the right place. Selling put options is different than selling covered calls, however, both carry about the same risk, and are safe ways to generate income. But, what if you wanted to generate weekly or monthly income from equities …