Options can take your investing to a new level
- They can be utilized safely
- But they do pose risks you should know about
Here are 2 strategies I use weekly to bring $1000s every month in option premiums
1) Selling Covered Calls
2) Selling Puts
See how I do this BELOW👇
- They can be utilized safely
- But they do pose risks you should know about
Here are 2 strategies I use weekly to bring $1000s every month in option premiums
1) Selling Covered Calls
2) Selling Puts
See how I do this BELOW👇
1/ Selling Covered Calls
This strategy is a very conservative way to trade options because you are using stocks you already own
Remember, 1 option contract = 100 shares
So, if you own 100 shares of any stock or ETF, you can sell covered calls
This strategy is a very conservative way to trade options because you are using stocks you already own
Remember, 1 option contract = 100 shares
So, if you own 100 shares of any stock or ETF, you can sell covered calls
2/ Selling Covered Calls cont'd
The strategy here is you sell an option for a higher stock price than today
Let's use $AAPL as an example
$AAPL trades at $150 right now
Let's look at the $160 call option
Jul 29 '22 $160c $1.05
The strategy here is you sell an option for a higher stock price than today
Let's use $AAPL as an example
$AAPL trades at $150 right now
Let's look at the $160 call option
Jul 29 '22 $160c $1.05
3/ Selling Covered Calls cont'd
Jul 29 '22 = Expiration Date
$160 = Strike Price
$1.05 = Option Price
Remember, 1 option contract = 100 shares so take the $1.05 x 100 to calculate the Premium You would receive
The person BUYING the option would pay you $1.05 as the seller
Jul 29 '22 = Expiration Date
$160 = Strike Price
$1.05 = Option Price
Remember, 1 option contract = 100 shares so take the $1.05 x 100 to calculate the Premium You would receive
The person BUYING the option would pay you $1.05 as the seller
4/ Selling Covered Calls cont'd
So if the price of $AAPL stays BELOW $160 by the expiration date:
1) You keep your $105 premium
2) You keep your 100 shares you already own
So if the price of $AAPL stays BELOW $160 by the expiration date:
1) You keep your $105 premium
2) You keep your 100 shares you already own
5/ Selling Covered Calls cont'd
If the price of $AAPL goes OVER $160 by expiration date:
1) You keep your $105 premium
2) You transfer 100 shares of $AAPL to the option buyer
If the price of $AAPL goes OVER $160 by expiration date:
1) You keep your $105 premium
2) You transfer 100 shares of $AAPL to the option buyer
6/ Selling Covered Calls cont'd
So, you can see how this strategy has very low capital requirement, really no capital requirement
You will just be departing from shares you already own
You will gain capital between current price and strike price
So, you can see how this strategy has very low capital requirement, really no capital requirement
You will just be departing from shares you already own
You will gain capital between current price and strike price
7/ Selling Covered Calls cont'd
So what is the RISK?
No gains above $160 will be gained
Say $AAPL goes from the $150 price today and has a HUGE earnings announcement that sends the stock to $175
Any gains over $160 you will miss out on
So what is the RISK?
No gains above $160 will be gained
Say $AAPL goes from the $150 price today and has a HUGE earnings announcement that sends the stock to $175
Any gains over $160 you will miss out on
8/ Selling Puts
On the other end is selling Puts
This is a strategy you would use when you are looking to collect a premium on a stock you would like to buy at a lower price
Who wouldn't want to buy a stock at a lower price
Let's use $MSFT for this example
On the other end is selling Puts
This is a strategy you would use when you are looking to collect a premium on a stock you would like to buy at a lower price
Who wouldn't want to buy a stock at a lower price
Let's use $MSFT for this example
9/ Selling Puts cont'd
Selling Puts requires no upfront capital, but it COULD require a lot of backend capital at expiration
This strategy involves buying 100 shares of the underlying stock at the strike price
So be careful doing this for high stock price positions
Selling Puts requires no upfront capital, but it COULD require a lot of backend capital at expiration
This strategy involves buying 100 shares of the underlying stock at the strike price
So be careful doing this for high stock price positions
10/ Selling Puts cont'd
$MSFT trades at $257 currently
Let's say we would rather buy at $235, which would have the stock trading below 22x earnings
Jul 29 '22 $135p $1.45
$MSFT trades at $257 currently
Let's say we would rather buy at $235, which would have the stock trading below 22x earnings
Jul 29 '22 $135p $1.45
11/ Selling Puts cont'd
July 29, 2022 = Expiration Date
$135 = Strike Price
$1.45 = Option Price
Since you are SELLING the put, the option buyer will be paying you $145 per option contract (100 x $1.45)
July 29, 2022 = Expiration Date
$135 = Strike Price
$1.45 = Option Price
Since you are SELLING the put, the option buyer will be paying you $145 per option contract (100 x $1.45)
12/ Selling Puts cont'd
If the price stays ABOVE the strike:
1) You keep the $145 option premium
If the price goes BELOW the strike:
1) You keep the $145 option premium
2) You buy 100 shares of $MSFT at $135
If the price stays ABOVE the strike:
1) You keep the $145 option premium
If the price goes BELOW the strike:
1) You keep the $145 option premium
2) You buy 100 shares of $MSFT at $135
13/ Selling Puts cont'd
Risk: This strategy can be much more cash intensive, so ensure you have the cash available when using this trade
If the stock falls to $125, you would be buying 100 $MSFT shares at $135, down $10 per share
If the stock craters to $100, you would be down
Risk: This strategy can be much more cash intensive, so ensure you have the cash available when using this trade
If the stock falls to $125, you would be buying 100 $MSFT shares at $135, down $10 per share
If the stock craters to $100, you would be down
14/ Selling Puts cont'd
Many more risks with Selling Puts, but it is a great strategy for stocks you want to buy as long as you are comfortable at the strike price
Many more risks with Selling Puts, but it is a great strategy for stocks you want to buy as long as you are comfortable at the strike price
Here are 2 GREAT resources put together by @BusinessFamous to learn more about both of these strategies:
Turbocharge Your Dividends (Covered Calls)
gumroad.com
Turbocharge Your Dividends (Covered Calls)
gumroad.com
The other is titled "Get Paid While You Wait" which covers Selling Puts
gumroad.com
gumroad.com
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