How to Sell Puts for Instant Cash
How to Sell Puts for Instant Cash
Today, we’re going to cover one of the key components of my successful income strategy: selling put options.
I know options have scared off more than a few traders because of the complicated vocabulary and supposed risk.
But once you get the terms down, options don’t have to be stressful — especially when you use our put-selling strategy.
In fact, this is one of the most stable avenues for generating a steady stream of income.
If you haven’t done so yet, I suggest watching my Intro to Options video below. In it, we provide a brief explanation of all the terms you’ll need to know. It’ll be sure to make you more comfortable when making my trades.
Now, after you’re finished watching that, it’s time to take a look at why this is a superb income-generating strategy…
Introduction to Options Trading Tutorial
Collect Quick Income
Let’s say Microsoft is getting beaten up during a market downturn, but we believe the company is stable enough to bounce back. Not only that, but it has a significant dividend we want to start collecting.
That’s when we look to sell puts on the company — something I’ll often refer to as a “short put” position.
Now, by selling puts (our bet that an underlying stock will rise), our only risk is ending up with shares of the stock — which is fine by me, since I only trade fundamentally sound stocks with a decent yield that I’d want to own anyway.
Since that is our risk, your broker will ask that you tie up some of your capital as part of the option trade, but more on that below.
See, when we sell a put option contract, we have the obligation to buy the stock at an agreed-upon price if the stock falls by a certain amount by a certain date.
We instantly get paid a premium for agreeing to this.
If we don’t get put the stock, we simply collect the premium and move on. If we do get put the stock, well, now we own shares of a solid, dividend-paying company that we already wanted to own.
Let’s go back to our Microsoft trade. Here’s the action we’d want to take:
|Example only: Action to Take|
|Option Type:||Put Option|
|Action:||Sell to Open|
|Order Type:||Limit Order|
|Duration:||Good ‘Til Canceled|
|Limit Price:||$1.60 (Anything above $1.60 is great.)|
|Trade Deadline:||If your order is not filled in the next week, I’ll update you on the trade.|
This is the basic format I will send you whenever I issue an alert. All of the essential trade details are here. So if you’re speaking with your broker, this is the script.
If you’re doing it yourself online, though, don’t worry about the mechanics: I’ve put together a quick video showing an example of how you can make this type of trade.
To watch me walk through the steps, please view the put-selling tutorial in your Power Options video package.
How to Make the Trade: Put Selling
In each of my alerts, you will get an action to take (as illustrated above), plus all the fundamental analysis you need to understand why I’m recommending this trade.
I know that this is a lot of information to take in, but it’s also why I made sure we are giving you a month for free. This allows you to take your time and learn the system without having to rush and make a trade.
There are always great income opportunities in the market, so if you miss the first trade or two, no worries — another income opportunity is just around the corner.
That’s all for today, but remember to keep an eye on your inbox — tomorrow, I’ll send you another email that explains more of the income-generating tactics in Pure Income.
Editor, Pure Income