My favorite financial investment strategy is Put Selling whether as naked puts or cash secured puts. In its most basic terms when an investor gets involved in put selling, they are selling someone the legal right to assign, or put shares to them at the put strike price they have sold.
Put Selling – Naked Put Definition
Put selling is referred to as “Naked” because when an investor does put selling, they have “exposed” themselves to assignment as they do not own the stock shares they have sold the naked put against. The investor is therefore naked the shares. Like any strategy there are pros and cons, but the naked put option trade is not risky itself, it is the investor who blindly sells puts without understanding the strategy that makes it risky. Some investors define Naked Put as when they do put selling without having enough capital behind them to actually pay for the stock if assigned shares. Select this Put Selling link to read Wikipedia’s definition of a put option.
Put Selling – Cash Secured Put Definition
Cash secured puts is a term investors use to refer to put selling and having cash in an account that will pay for the stock if the puts the investor sold are assigned.
Put Selling Articles Index
This is a complete index of all articles I have written on put selling. I created this index of my put selling articles for other investors to understand how I use put selling as an investment strategy.
After understanding my put selling strategies, investors can develop their own put selling strategies that suit their risk level and investing style.
This Index is updated with each new article on Put Selling. If you want to be notified of each new Put Selling article consider signing up for email alerts or join my RSS Feed.
This is a great place to start when wanting to learn about Put Selling. Many investors cannot understand why I would set up put selling as a principal financial investment strategy. In fact most investors do not consider stock option selling as “investing”. Every week I get emails from readers “complaining” that put selling is not investing. I also always hear that options are “too risky”. Understood properly, options selling as a financial investment strategy is among the finest of strategies. It is very worthwhile for investors to learn what is option trading and how to implement it. Put selling offers a lot of potential, is exceptional for rescuing capital caught in downturns and it is very enjoyable to see earnings month after month, year after year from put selling.
I have put this as the second article in the Put Selling index as it should be read next for investors to understand my principal investment method. Put selling is looked upon by most investors as not “truly investing”. For myself, Put Selling is my principal investment method. It is important to remember that for me, I am not “just” randomly put selling for income. I am put selling as a long-term investment method. I need consistent stocks that stay within a trading range to make selling puts consistently profitable. Put selling is a strategy that earn small monthly sums that compound over time. One or two bad trades can wiped out months of profits. Instead consider a different approach and take the steps necessary to turn put selling into a principal investment method that consistently is successful.
This third article on put selling is a brief introduction to understanding what is meant by put selling whether as a naked put or cash secured put and how it is used in a trade. This brief outline will assist in forming a basis by which an investor can then expand their knowledge to determine the suitability of put selling as a major part of their financial investment objectives.
This is the fourth article in the index as it’s an example of selling a single put on a stock. This is done to demonstrate what is meant by the put selling strategy and how it works. Investors who have sold puts before will not need to view this article.
The debate over whether put selling or selling covered calls are basically the same strategy, has raged for years. They are both selling stock option strategies. Go to any financial forum and post a note about how you feel as an investor that covered calls are better or put selling is better and you will stir up a debate. Over the years I have developed various put selling strategies that have shown to me how flexible and truly exceptional selling puts are in the arsenal of financial investment. Leaving aside tax implications involved in covered calls and put selling, I believe put selling is far superior to covered calls and here are my 10 reasons.
An investor who has never done Put Selling often finds the concept of why anyone would risk capital for gains as small as 25 cents, puzzling. Investors need to forget everything they know about buy and hold and instead start from a blank page and the concept and reasons for Put Selling will quickly become clear.
Put Selling can be profitable and highly rewarding if some basic rules are applied. On the other hand put selling without a strategy or plan can be a recipe for disaster. Here are my 4 Basic Rules For Put Selling.
Many investors look at put selling as “free money”, which is not correct. There is nothing free about put selling. As soon as the put is sold I can easily be assigned shares; watch the sold put triple in cost to close if the stock collapses; or end up running repair strategies for months or even years in an effort to regain lost capital. Put selling does not result in “free money”. Nonetheless there are often many trades that appear where the premiums are so compelling that I would sell puts even if I had no intention of ever owning the stock. After all, selling options as a financial investment is all about gathering income. I found that when I sold naked puts with no intention of owning the underlying stock, these became my rules or guidelines. Remember nothing on my site is financial advice or recommendations. Trade at your own risk. My site is for discussion and presentation of my ideas only.
I receive emails all the time from investors who complain that Put Selling is a strategy that limits upside but has unlimited downside. They complain that through Put Selling an investor misses out on 10 bagger opportunities, those stocks that can double in a short period to a few years. I have heard these complaints many times over the past 4 decades. Long before options were in vogue and certainly before many were available on a lot of stocks, I looked to Put Selling as my principal investment method. It is true that I miss out on the 10 baggers, but I also miss out on the 10 downers as well. It comes down to your choices as an investor. I choose safety and caution through Put Selling large cap dividend stocks in exchange for what I feel is a very good return. In this article I look at three stocks, Yum Stock, RIM Stock and Walmart Stock to show that Put Selling as an actual method of investing not only works but provides superior returns and superior protection.
This two part article looks at a put selling rolling strategy designed to protect the investor when their sold puts fall deep in the money. The trade examined is ITW Stock (Illinois Tool Works Stock) from the bear market of 2008 to 2009 when much to my surprised I found my sold puts extremely deep in the money. At one point my sold puts would have cost more than $20.00 to buy to close. I explain how I apply this strategy to take what many investors believe is a losing trade and turn into a 40% gain in 1 year. Many investors do not understand the power of options and how to apply strategies that are outside the normal thinking. This very simple rolling strategy can be applied to a trade where puts have fallen deep into the money as the underlying stock collapsed, yet the investor can still take advantage of the sudden bargain basement prices in stocks as well as earn excellent option returns from the higher volatility that comes with a bear market collapse.
This unique article looks at the benefits of keeping cash always available for market panics or severe drops to purchase stocks at fire sale prices and yet using the available margin which is available through the cash portion of a portfolio, for Put Selling to boost the annual return from other Put Selling trades. If for example a portfolio returned 12% in a year, Put Selling with margin could be used to boost that return by 3% or sometimes better while keeping risk low and selling against rising stocks. This is a members only article.
Here are the tools I use and how I would approach any stock, to decide on strike put prices. The most important aspects of put selling as an investment method is stock selections and strike selections.
In this article I look at the steps taken to determine the prime put strikes to consider for selling. The focus is on safety of not being assigned, excellent valuation should the stock collapse and I be assigned shares, and determining adequate option premium. The article shows how put selling is not done randomly but through a careful process of stock selection, put strike and chart pattern as an ongoing financial investment.
In a similar article as the Exxon Mobil Stock article above, this same put selling process is shown with Microsoft stock. While many people think put selling is done by randomly selecting puts that are at or below the money, I actually have a design when selling puts. This article explains how I sell puts based on historic patterns and bear market lows in stocks and through the use of capital earned, try to ensure that if assigned shares my cost basis will place me at historic low levels in the underlying stock. I hope through posting such articles, other investors will take time to consider selling options as more than just an attempt to earn income but as a long-term strategy that is neither complex nor difficult, with significant profit potential.
Strong stocks make excellent put selling candidates for the simple reason that they provide increase protection against possible assignment. However when a strong stock becomes over-valued the temptation is to stay with the same put selling strategy as the stock rises. But over-valued stocks fall quickly when selling commences and often the put seller finds himself stuck either holding shares at over-valued prices OR buying to close sold puts that were once out of the money and overnight can become in the money. Taking losses is never pleasant and can be avoided. In this two part series I look at Coca Cola Stock and how an investor can lay out a put selling strategy to continue to benefit from an over-valued stock while protecting his position from possible assignment or loss.
In the second and concluding article on put selling on over-valued stock, I take the lessons learned from Part 1 and show how to establish a winning put selling strategy based on a stock’s past performance and applying it to the future. I have used this put selling strategy for over 3 decades including when options were available on only a handful of blue chip stocks. Yet despite the thousands of stocks available today with options, this put selling strategy continues to reap large profits for my portfolio while protecting against being assigned shares at over-valued prices.
Market timing is considered by many people as inaccurate and not worth the effort. I am not sure what kind of effort it actually requires since it is only a matter of looking at market timing tools at the close of the day to get a prediction for market direction. It certainly does not take much time. Just a glance, really. This article looks at how I use market timing technical tools to keep me on the right side of the market. When selling puts, it is important to always be on the right side. It doesn’t matter if the market moves higher when I have sold puts, but it can really hurt my portfolio if the market moves lower after I have sold puts. This article explains what I do to keep myself on the right side of market direction when selling puts.
A question from a reader regarding put selling on Caterpillar stock resulted in this article in which I discuss married put, naked put, spread and collar as financial investment strategies to consider.
In this article I look at establishing a put ladder on Barrick Gold Corp, stock symbol ABX. As a financial investment strategy, the put ladder should be learned and used by all option investors. It provides exceptional income, strong protection and significant profit potential particularly in a bear market.
Often put selling can end up with sold puts that are deep in the money. In this article I explain a somewhat simple formula to avoid early assignment. While it does not always work, on some stocks the formula works very well because the stock is fairly predictable in relation to other risky asset classes such as commodity stocks. It’s because of volatility. Commodity stocks have a lot more volatility than stocks like Johnson and Johnson stock, and JNJ Stock is not alone. Other similar stocks include PepsiCo Stock, Coca Cola Stock, Microsoft Stock, Intel Stock, Clorox Stock and many more. In this article I look at rolling put options over a period of months to years as a prime financial investment strategy that pays strong returns for the minimal amount of time involved by the investor.
In this article I look at Visa Stock and AT&T Stock and discuss why sometimes it is better to accept shares as part of my ongoing financial investment when my sold puts end up in the money at option expiry rather than buying back the in the money puts to roll down and/or out.
Whether an investor is put selling with the goal of avoiding assignment or shares or not, Put Selling for profit and income needs consistent winning trades. One of the best methods available is understanding how to find support levels in any stock and how to apply that knowledge to consistently winning Put Selling trades.
Often when investors sell out of the money puts and the puts fall in the money, it becomes difficult to decide what strategy to use next. Because of this many investors buy to close their “in the money puts” and take the loss to get out. This can be damaging to the oveall financial investment strategy being employed and an investor’s portfolio as a whole. The key to avoiding such losses is to plan what your strategy will be if the stock falls, BEFORE you place the original trade. Here are 5 financial investment strategies that this investor could consider to use after his Chevron Stock Puts ended up deep in the money.
Equities of every kind have always been risky assets but with the ongoing credit and debt crisis those markets could become even more volatile. As a small investor the option market is an area that very few large fund managers can invest in. With their billions of dollars to invest they could never buy enough options without moving the options market dramatically. This mean that through put selling techniques I can invest in a market that the big money players have little to no manipulation effect. In this article I discuss the use of large cap dividend stocks and put selling during market dips and buying to close sometimes within days of selling puts. This is a strategy I have used through many volatile markets and it has rewarded me immensely.
Bull put spread strategy is more conservative than put selling, with defined losses established right at the outset. The bear put spread is popular among option investors and is in wide use. Yet it is often not understand by many option investors which is a shame since while it may not at times provide as high an income as put selling, the fact that maximum losses are known at the time of establishing the trade can make a very big impact on a portfolio. Like any option strategy there are many variations to the bull put spread that can create more income and better protection over the lifetime of the bull put spread. This article looks at Cat Stock and demonstrates a bull put spread.
Many investors find that earning 1% a month or 12% a year is difficult when stock markets move higher. But by having both a 1% a month and 12% a year as goals, an investor finds that put selling works well if an approach is taken where the trade is balanced against the income earned and the risk taken. Uptrend stocks often move into overvalued territory and yet investors continue selling puts either at the money or in the money in an effort to earn more than 1% a month in put selling income. When this occurs results can be disasterous for a portfolio as overvalued stocks plummet faster than they climb often trapping the put seller and leaving behind large losses. In this article I discuss the importance of managing risk while implementing the 1% put selling income monthly strategy.
After my first 5 years of put selling I saw the power of using margin in a conservative manner. Margin made an enormous difference in my put selling portfolio of stocks. This article looks at put selling with and without margin and the returns that a conservative approach can produce.
As investors, we are seeking both profit and income. Profit and income will grow and compound our capital as well as provide a level of income for retirement. For many investors the whole purpose in saving money, is to build a nest egg that they can live off as they age. Learning how to determine support and resistance levels in stocks is key to successful investing. The first part of this article on support and resistance explains what support and resistance is and the tools I use to determine where support and resistance in an asset such as stocks, may lie. In the article I look at Johnson and Johnson stock and PepsiCo Stock. I explain the importance of support levels for stock purchasing and put selling and resistance levels to close sold puts and sell stock.
In Part 2 of the series looking at Support and Resistance I delve into how I use the volume indicator tool and combine it with the stock charting tool to assist in pinpointing where support is and where resistance lies. Without being able to determine support and resistance in an asset such as stocks, investors are often trading blindly and many times find themselves buying at over-valued prices and end up selling for losses. To avoid this pitfall, understanding support and resistance levels in the underlying asset makes for very profitable investing. In the article I look at how volume is a prime component of finding support and resistance. It is a simple concept which once learned can be reused daily by investors to prepare them for when to buy stock and sell it as well as those of us who prefer put selling or covered calls as a principal investment strategy.
This put selling strategy article is bundled with 4 other strategies in a PDF entitled “4 Investment Strategies For Ultra ETFs”. that is available for purchase only. It can be bought in the fullyinformed store for $25.00. The Twin Sister Put Selling Strategy is a conservative twist to the Cry Baby Stock Trading Strategy which is one of the strategies within the same PDF.
While designed for Ultra ETFs such as 2X or 3X funds, this excellent strategy can be applied to any stock position although the larger premiums for Ultra ETFs will of course grow the position faster. The Twin Sister is more conservative that, the Cry Baby Stock Trading Strategy. The Twin Sister Strategy is often used by investors who have been caught with a plunge in share value and need to generate a return while waiting for their original investment to recover. The Twin Sister uses technical tools of Momentum and Ultimate Oscillator to assist in picking prime moments to sell out of the money puts. The Twin Sister strategy assists investors in reducing their overall cost basis by taking advantage of the volatility of Ultra type ETFs. The article shows actual examples and the types of returns that could be anticipated through this put selling strategy. It is more conservative in nature than the Cry Baby strategy but returns can still be quite profitable and if used properly, they can compound.
Many investors believe that once puts have been sold they have a good chance of being assigned shares if the stock should fall below their put strike price. Other investors believe that put selling locks the investor into losses in the event that the stock collapses while still holding the sold puts. This has not been my case and in this article I discuss the steps I take to insure that I am protected from losses and can rest comfortably knowing that my put selling strategy gives me total control over my trade from start to finish, including accepting shares in the underlying stock only when I want them and not before.
Keeping a trader’s journal is an excellent method to learn from the past and not repeat the same mistakes. Microsoft Stock has provided double digit returns annually since 2000 but for many investors Microsoft stock has been a disappointment. This article studies how my put selling profits from Microsoft stock over the years are directly tied to historic chart following and understanding the underlying security.This is a method of long term put selling that any investor can learn and apply to specific stocks for long-term income and growth.
When a stock which has been in a trading range begins an uptrend, put selling becomes more difficult for many investors particularly those who are not interested in ever owning the underlying shares. In this look at Microsoft Stock, I discuss the steps I take to put in place my strategy for put selling a rising stock. Stocks that are rising offer a unique opportunity for put selling which many options traders are not aware of. A rising stock normally is accompanied by an increase in volatility which pushes option premiums higher making put selling a rising stock very profitable. By using proper technical timing tools, I am able to benefit from the rising trend, sell puts at the money as the stock climbs, earning very high put premiums. These same technical tools watch for the inevitable end to that trend and warn me in advance that the uptrend may be ending allowing me sufficient time to close my put trades before the trend turns back down. Due to this I am able to follow the uptrend from start to finish and reap profit and income from increased put option premiums.
Put selling sometimes can be a bit misleading. When a put seller makes 1.4% in a trade over a single week he will often quote the amount annualized. I believe this is incorrect and can give a false sense of how well put selling strategy is performing on an overall portfolio. In this article I discuss what I believe is the best method to determing the rate of return or return on investment when it comes to put selling.
This article discusses a simple but effective strategy I have used for years on stocks that I have no interest in owning shares or being assigned shares but which I want to sell puts against for the option premium.
When the stock markets pushes back up from deep corrections or bear market sell-offs, it’s hard to know whether to trust the rally. These tips have allowed me to stay invested in a recovery while providing protection against assignment and large losses.
This article looks at the 4 Simple Steps I use on my stocks before Selling Puts. These 4 Steps assist in establishing what Put Selling strategies are best to employ and what rescue strategies I will be using. I do all of this in advance of the actual trades.
This article continues the 4 Steps I use and shows how I applied them to recent Intel Stock trades.
This article looks at using the 200 day moving average strategy to pinpoint entry and exit points in longer-term investing and using that knowledge to for Put Selling during periods of decline.
This article looks at how I use the 50 day, 100 day and 200 day moving averages to know when to preserve my capital and when to commit more capital to Put Selling based on market direction and overall volatility.
Put Selling against weekly options can provide enormous profits if done properly. This article studies two key aspects I use when Put Selling against weekly options on stocks.
Knowing how and when to roll put options is an important aspect of Put Selling. Eventually most investors who sell put options will end up having to decide the best course of action for rolling put options.
Investors every day engage in Put Selling against speculative stocks and junior stocks. I stopped this more than 3 and a half decades ago. This article explains my reasons for Put Selling only large cap dividend paying stocks.
What happens when my Put Selling results in naked puts ending up in the money when the underlying stock falls in value. How about a plunge in value? Here is one such strategy that has served me well over the years. It allows me to continue to earn profit and income while freeing up capital with each roll. It reduces my exposure to assignment at over-valued levels and allows me to continue to do more Put Selling at lower valuations which helps to reduce my overall cost basis should I be assigned on the falling stock.
One goal of put selling is to enjoy other investors giving me their capital each time I sell puts. Often they are gambling that the stock I have sold puts against is going to work out in their favor. Since I do not care whether or not I own the stock I sell puts against, I am happy to take their money and if the stock stays about my sold put strike, I then sell puts for the next month. By other investors giving me their capital they are helping pay for the possible assignment of the underlying stock. This article looks at how that amount can rapidly increase which makes put selling all the more profitable.
Leap options provide a lot of opportunity for both earning above average put income while at the same time placing yourself deeply out of the money on a favorite stock. The strategy does at times hold a lot of merit.
When stocks are rising selling in the money put options for income is an excellent strategy for earning large profits but it must be done properly. To successfully use this strategy investors need to also have in place strategies to protect the in the money naked puts sold from a downturn in the rising stock. This strategy article discusses various strategies that can be put in place to protect and profit from selling in the money put options for income.
The introduction of weekly options can be used by investors for boosting profits while also control risk. One of the more interesting strategies is the biweekly Put Selling strategy which I use to earn substantial returns while at the same time putting in place rescue strategies in advance of being needed. This is a link to the strategy outline. Once you read the outline and understand the strategy you can read a variety of other articles and watch the strategy as it is being used on Apple Stock.
Not every investor enjoys a bigger return when there may be a bigger risk of assignment of stock. This strategy takes the biweekly Put Selling strategy and adds a level of comfort to add a larger safety net when selling weekly and biweekly put options. While more conservative in nature this strategy can still produce excellent returns as much as 24% to 28% annually depending on the stock. The stock used in this example is Apple Stock.
Once puts are sold how does an investor handle the daily fluctuations in both the stock and the options. As well the decision of when to close a trade or let it run into expiry is often difficult. This article looks at using a rolling stop-loss to protect a naked put or naked call position and work toward earning the premium profit available. This article includes a look at using leap options with the rolling stop-loss method.
There are many methods that can be used to assist investors in Put Selling against stocks with the goal of never being assigned shares. One of the better methods is using the volume indicator against the Bollinger Bands when studying a stock’s chart trading pattern to pinpoint the best entry points to sell puts on a stock. No one wants to sell puts for 50 or 60 cents and then watch the stock plunge leaving them holding deep in the money naked puts. Put Selling is a strategy of small monthly gains on a variety of stocks but continually Put Selling at the wrong time can decimate a portfolio. Instead of small gains an investor can end up with growing losses. This is not the purpose of Put Selling. This article shows a large number of graphics and I discuss how I use the volume indicator and the Bollinger Bands to determine when to sell puts both on a pull back and when a stock is on the rise. This strategy article looks at selling puts at the best possible time to avoid stock ownership and protect capital from loss in a downturn. This article is 2700 words in length and if printed will take 10 pages.
Every year as November arrives, large fund managers and hedge fund managers know that they must end up with a decent year when compared to the overall market index. Most clients who invest through mutual funds, institutional funds and hedge funds, check their returns once a year. Fund managers know that two-thirds of these clients will jump from one fund to a better performing one. Therefore if their fund returns have not even come close to the S&P annual return they will do everything possible to improve their returns by year-end. While as a small investor I cannot move stocks like these big money managers can, I can profit by understanding what year-end window dressing is all about and what stocks to be following.
Many investors sell put options against stocks they think they would own if assigned shares, but when the stock they are selling puts against collapses, they flee. Often they buy back their sold options for large losses as the stock plunges leaving their naked puts deep in the money. This can be disasterous for small investors. This article studies a strategy I have used for decades to handle collapsing stocks that I am holding in the money naked puts in. I look at three stocks in this article, YUM Stock, Intel Stock and Cisco Stock and show how I handle the collapse of all three stocks.
Another interesting Put Selling strategy is the cash cushion strategy. This strategy is designed to create a mushrooming cash cushion. Much like a balloon the cash cushion strategy grows over time and eventually can protect an investor from a serious downturn in a stock.
One of the more effective strategies especially in a raging bull market is the Put Selling ladder strategy. This strategy is designed to earn income but focuses primarily on protecting the overall trade from losses. Highly effective during a rise in a very overbought stock market or stock itself, the Put Selling ladder has enormous potential for continuously trading in stocks where the investor wants a high degree of protection but still participate in annual double-digit returns.
Put Selling Options Index Page 2 – This section looks at how put selling strategies have been applied to various stocks in real trades.