The 3 Most Successful Options Trading Strategies: Your Guide

The 3 Most Successful Options Strategies (Win Almost Every Trade)

Looking for the  most successful options trading strategies for traders to make consistent profits? This post has you covered. Plus, I discuss how to ensure that almost every trade is a winner.

Many people buy calls and puts; that's gambling, not investing (although there are times when it's worthwhile to buy options). Selling option premium is the most consistent way to make money as a trader in the stock market.

Key Takeaways

  • - Selling (not buying) stock options is the best option trading strategy that yields consistent profits
  • - Specifically, selling vertical credit spreads (mostly puts) are the option trade structure that I prefer
  • - Selling straddles & strangles are NOT a good trading strategy because the call side usually gets tested in a bull market (although there are specific times to utilize this strategy)
  • - To ensure that almost every trade is a winner, you may have to “roll out” your tested trades for a credit while reducing size and improving your strike price (although closing out challenged trades for a small loss is completely fine)

Most Successful Options Trading Strategies for Beginners

Selling options is your best way to increase your income because the majority of options expire worthless. This guide is meant to be an option strategies cheat sheet.

I highly recommend selling puts because the stock market has a “long bias”, meaning that it goes up more than it goes down.

While people are oftentimes scared of “black swan” events and market crashes, you can easily protect yourself against a stock market collapse by trading small and also selling put credit spreads with a strike price that’s ~10% below the current price of the underlying.

When people buy 100 shares of Amazon, they don't automatically assume that it will go bankrupt.

As a result, it's strange that people say that selling naked options is risky when it's much less risky than buying stock (although selling puts can definitely be risky if you trade too large and don't hedge your positions).

When selling puts, I prefer two specific options trading strategies:

  1. Vertical credit spreads
  2. Naked puts (if I want to take ownership of the underlying and participate in the upside)

However, it's very important, when selling options, to not trade too large because you can be forced to close out a position if you run out of buying power!

Selling options is less risky than buying stocks. Those who claim otherwise are likely not profitable traders

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Trading Examples of Naked Puts and Spreads

Naked puts: Let’s say that XYZ is currently trading at $210. We can sell a put contract with a strike price of $180 that expires 6 weeks in the future.

In exchange for agreeing to buy XYZ if it falls below $180, we receive a credit (“option premium” or “premium”) of $2 / share. 

Remember that 1 contract equals 100 shares, so for every contract we sell, we’ll receive $200 (1 contract x $2 credit / share).

If XYZ trades above $180 at the time of expiration, our option expires worthless and we keep the entire $200.

In this trade, our break even point is $178 (excluding commissions), and as long as XYZ stays above $178 then this trade will be profitable.

Remember that there is no guaranteed profit option strategy but teaches the best option strategy for beginner through advanced option traders.

In the past, I preferred selling naked puts because it’s simple, has low commissions, maximizes the premium received, protects against trading too many contracts and it offers a lot of flexibility when rolling the contracts (more on this later).

However, since 2019 and in 2020, I have primarily begun selling spreads. The reason is that I believe that the enhanced capital efficiency, plus the tail-risk protection from trading vertical credit spreads outweighs the additional premium and trade management advantages from trading naked options.

For smaller accounts, selling naked puts may not be capital efficient because it uses up a lot of buying power (so you'll likely be forced to only trade spreads).

I trade both a large and a small account. My small account was up over 115% in 2019 (Click Here to Watch the Video) and I trade both naked put options and spreads in the small option account.

Vertical credit spreads: Let’s say that XYZ is currently trading at $210. We can sell a contract with a strike price of $180 that expires 6 weeks in the future. In exchange for assuming the risk of buying XYZ at $180, we receive a credit of $2 / share.

This is very similar to the sale of the naked put.

To make this trade a spread, we also buy a contract with a strike price of $170 that expires 6 weeks in the future. In exchange, we pay $1 / share.

In total, we have sold a $180 put and we've also purchased a $170 put and received $1 / share net credit (receive $2 for selling the put and we paid $1 for buying the put).

There are two primary advantages of selling a vertical credit spread:

  1. It’s a defined risk trade, meaning you have a clearly defined maximum loss
  2. The buying power reduction is much less (it's a more capital efficient trade structure)

In the example above, the maximum loss is $10 per share less the $1 credit, so for every contract you sell, your maximum loss is $900 and your maximum gain is $100. If, at the end of six weeks, XYZ is trading above $180, you will make $100 per contract sold.

If XYZ trades between $170 – $180, you’ll be forced to purchase XYZ stock at $180 / share. If XYZ trades below $170, you’ll still be forced to purchase XYZ stock at $180 / share, but you can also sell it at $170 / share, so you will lose ~$900 / contract ($10 per share less the $1 per share in premium that you collected).

Don’t worry if this doesn’t make sense at this moment. It’s not rocket science and once you’re exposed to vertical credit spreads with greater frequency, you’ll naturally begin to understand it.

By selling naked puts, your maximum loss would occur if XYZ went bankrupt and fell to $0.

As a result, you’d have substantially greater potential risk by selling naked puts (although the bankruptcy risk on the companies that we trade is close to 0%).

Theoretically, when trading naked you could lose $178 / share (forced to buy XYZ at $180 less the $2 / share of premium received) if XYZ were to go bankrupt.

Since 1 contract = 100 shares, for every contract sold, you could lose: $178 x 100 shares = $17,800.

Since you can lose $17,800 for every naked contract vs. $900 for every vertical credit spread contract, your online brokerage firm will limit the number of naked puts that you can sell to adjust for this different in maximum loss.

In my opinion, the best options trading strategy is to sell vertical put credit spreads and we provide the best options trading education.

Why I USED to Prefer Selling Selling Naked Puts

So why did I prefer naked options? Because your expected return is substantially higher when trading naked options. 

There are numerous reasons why trading naked options were attractive to me:

The first is that by trading a naked put I receive twice as much premium ($200 / contract when selling a naked put vs. $100 / contract when selling a vertical credit spread).

Remember, we get paid by selling premium

Many traders are tempted to sell 5-10x as many vertical contracts to collect more premium since their broker allows them to trade substantially more spreads than naked options. This is the biggest mistakes that options traders make (since they trade too large). 

Don't be like most options traders who lose money!

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By increasing the number of contracts they hold, they are increasing their risk and commissions / trading expenses. Additionally, selling vertical credit spreads provides much less flexibility.

Let’s say that XYZ falls close to my strike price, with a naked put, I can easily “roll” that position by buying back the original $180 put and selling a $175 put with an expiration date of 2-3 weeks in the future.

This can usually be done for a credit (meaning that I’ll receive money even though I have also reduced my risk by agreeing to buy XYZ at $175, or $5 less than before).

With the vertical credit spread, if XYZ falls, I’ll have to buy back the original $180 put, sell the original $170 put and then roll out both legs by 2-3 weeks.

This is much harder and more expensive to do because the long protective put will be very expensive and I'll have to allocate the time premium that I receive towards buying another protective put option in the future.

In many cases, the time premium would serve me a lot better if it was allocated to reducing the size of the position or rolling to a more favorable strike price, instead of buying the long put option.

Also, because my original credit was less ($100 / contract for the credit spread), my break even point is also higher for the vertical credit spread ($179) vs $178 for the naked put.

My commissions when rolling a vertical credit spread will be approximately 2x more and the credit I’ll receive when rolling out the position will also be less since I’m buying an option when deploying a vertical credit spread.

The biggest mistake I see traders make is they trade too large. If you can sell 5 naked options, then you shouldn't trade 30 spreads (but some people who trade options do, and they eventually end up losing money).

Vertical credit spreads are especially useful when dealing with expensive stocks that are trading over $250 since selling a naked put will require a lot of buying power to make this trade.

In general, vertical credit spreads are one of my favorite options trading strategies and options trading strategies for beginners (I'll explain more below).

I see a few of my members trade too many spreads. If the underlying stock ends up below the put they've sold, yet above the put they've purchased then their broker will force them to close the position because their account size is not large enough to roll / manage the position and it's also not large enough to take assignment.

Why I Now Prefer Vertical Put Credit Spreads as an Options Trading Strategy

In my opinion, the most successful options strategy is to sell put credit spreads during a bull market and to take ownership of oversold stocks during a bear market and then participate in the upside of the stock.

I trade spreads because of the defined risk characteristics (you have a defined maximum loss when entering the trade).

Plus, vertical credit spreads are more capital efficient.

I trade about 80% spreads and 20% naked options.

The only time I'll consider trading naked options is during periods of high volatility when I'd like to be assigned the shares so that I can participate in the upside of the stock.

Regarding options trading strategies for beginners, I would recommend selling vertical put credit spreads.

I've finally learned how to make consistent money in the stock market: SELL OPTION PREMIUM!

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The way we setup trades permits us to be profitable up to 98% of the time. As a result, the biggest challenge is managing your size and buying power to ensure that if a trade goes against you, you're able to "bend but not break" so that you don't have to close out that position for a loss.

Best Option Strategies with Examples

Let’s assume that we’ll mostly sell vertical put credit spreads, a logical question (using the XYZ example above) is: why would would anyone risk $900 to gain $100? 

And the answer is…the odds and expected outcome are strongly in your favor. 

If XYZ is currently trading at $210 / share then the chances are ~50% that it will be trading above or below $210 in 6 weeks.

By selling options, as long as XYZ stays above $180, I get to keep the $100 / contract.

Even though we have $30 / share of “cushion” by selling the $180 put (current price of $210 – $180 strike price), it’s possible that the market will correct in the future which can drop the price of XYZ below $180.

If that occurs, we'll roll the position forward in time until it expires worthless.

As a rule of thumb when trading stock options, if your position gets tested, you should roll out (extend duration) for a credit and either reduce your position size or improve your strike price. You can also simply close out the position for a loss if your underlying thesis has changed (if the stock craters on bad earnings and the market is selling the stock heavily).

When selling options on indices or ETFs, it's usually worthwhile to take ownership, at a discounted price, and then participate in the upside.

I recommend only selling puts on positions that you wouldn’t mind owning.

For example, if I would like to own 1,000 shares of XYZ at $180 / share, then I'd be better off selling 10 put contracts of XYZ with a strike of $180 (as long as the premium received is high enough) because I will receive money ("option premium") in order to open that position.

In general, only about 5% - 10% of my trades will ever get tested; so 90% - 95% of them will expire worthless. Of the 5% - 10% that get tested, I normally only have to roll out the position by 3 - 6 weeks until it expires or I close out the options trade.

And that’s why everyone should risk $900 to gain $100: the probability of profit is extremely high and, even in the worst case scenario, you can roll out the position to continuously increase the amount of premium received while also reducing your risk.

This is why selling vertical put credit spread options is my favorite options trading strategy and trading options is the most successful options strategy and the best option strategy ever.

Making money in the stock market is all about estimating the probabilities of expected outcomes. Selling options is the only strategy where the expected return is exceptionally high.

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Why I Don't Like Iron Condors and Straddles / Strangles

Tastytrade says that Selling at-the-money (“ATM”) straddles and closing out the trade at 25% of maximum profit has a very high success rate.

Option Alpha encourages its members to sell iron flies on ETFs as its preferred options trading strategies (oftentimes with disastrous results).

However, in my opinion, it's an easy way to lose money because the call side will usually get tested (in a bull market).

As a result, selling ATM straddles as an options trading strategy is NOT smart.

For example, let’s say that XYZ is currently trading at $210. I could sell an ATM straddle (selling a put and a call with a strike price of $210 that expires in 6 weeks) and receive ~$8.50 / share

If I sell 10 contracts, that means I’ll immediately receive $8,500 in premium – that’s a lot of money!

However, the call side usually gets tested in these trades.

We trade market leaders and indices like SPY, LMT, AMZN, etc.

Long-term, these stocks tend to appreciate in value.

I believe that traders should NEVER enter a trade with the expectation that they will have to roll / manage the position.

When selling straddles (or strangles, iron flies, iron butterflies or iron condors) there's a very high probability that you'll have to manage the position.

Rolling positions is also VERY stressful.

And by selling a straddle, and selling a call those trades will usually get tested which will lead to stress and trading losses.

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Another issue that I have with straddles (iron flies, iron condors, strangles etc.) is that they require more maintenance and babysitting.

If I sell the $180 vertical put spread on XYZ, I can login to my account once a day for a few minutes.

But, if I sell the ATM straddle, then I’m going to be much more anxious if XYZ begins trading significantly above or below $210.

Yes, I realize that profiting from straddles, and closing out at 25% of maximum profit, has a decent probability of profit (I'm not disputing that), but when factoring in the increased closing trade commissions and the stress of monitoring the position, I prefer to stick with naked options or vertical credit spreads and do not trade straddles / strangles / iron condors / iron flies as viable options trading strategies.

The Most Successful Trading Strategies

There are many stock options strategies, but the best one is to sell put options, preferably vertical put credit spreads (when we're in a bull market).

When we're in a bear market, then you can switch to selling call credit spreads. It's important to avoid the temptation to trade too many contracts when selling vertical credit spreads. If any of your positions get tested, you can roll out for a credit and reduce your size or roll to a more favorable strike price.

Selling ATM straddles, and managing the position at 25%, while it has a positive expected return, is not something I encourage because of the higher commissions, increased anxiety / time required to monitor the position and the high likelihood of the calls getting challenged.

Best Option Trading Strategy - 2023 - 2024 Update

There have been some changes and I made some slight adjustments to the trading strategy. I'm currently trading more indices (QQQ and SPY) than previously.

Additionally, I've further reduced my watch list. I also am incorporating buying, and going long, stocks and also buying options during specific periods.

I also proactively hedge my portfolio by purchasing options. The best option trading strategy must be able to be profitable in all market environments.

By buying options, you'll be protected against large volatility expansion events. And by buying stocks, specifically when they're undervalued, you're able to participate in the upside.

I also have incorporated more 0DTE and 1DTE trading. That's why I believe that the best option trading strategy includes long stock / indices, short options and long options.

Frequently Asked Questions (FAQs)

What is the best stock strategy? 

The best stock strategy is to sell put options on stocks that you want to own. Then take ownership of those stocks if the options expire in-the-money. By doing this, you'll be able to purchase stocks at a discount while also participating in the upside potential of the stock.

You can also proactively hedge your portfolio during periods when volatility is low in order to reduce overall portfolio volatility.

Is there a guaranteed profit option strategy? 

There is not a guaranteed profit option strategy, however you can sell put options on market-leading stocks and then take ownership after these stocks have dropped 15% - 20%.

Then, you can participate in the upside of the stock.

Additionally, by buying options during periods of high complacency, you can decrease portfolio volatility while also making money during a stock market crash.

What is the most successful options strategy?

Sell put options on market-leading stocks, with strong brands, and then take ownership after these stocks have dropped 15% - 20%.

Then, you can participate in the upside of the stock.

Additionally, by buying options during periods of high complacency, you can decrease portfolio volatility while also making money during a stock market crash.

What are 10 Options Trading Strategies Every Investor / Trader Should Know?

There aren't ten, but there are definitely a few important ones:

1) Selling naked options and then taking ownership to participate in the upside

2) Selling vertical credit spreads

3) Buying puts to protect your portfolio against volatility expansion

4) Buying long-dated calls and selling short-dated calls against it

5) Trading 0 DTE and 1 DTE

About the Author David Jaffee

I (David Jaffee) help people become consistently profitable traders while minimizing risk. Learn more about our live trade alerts and courses. I graduated from an Ivy League University and worked at some of Wall Street's most successful investment banks. Subscribe to my YouTube channel for valuable videos - BestStockStrategy YouTube Channel​. My personal website is

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Leave a Comment:

Jeff chan says October 14, 2020

if we think the market is going up, why vertical put credit, we can just use call option??

    David Jaffee says October 14, 2020

    it’s the difference in probability of profit. With a call, you have to be right directionally and the magnitude of the move has to exceed the premium that you pay. When selling a put, you can win if the stock goes up, stays the same or even if it goes down a bit. Plus, you COLLECT premium vs pay premium. It’s the difference of being the casino vs. being a gambler.

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    David Jaffee says December 18, 2019


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Noel Dsylva says April 6, 2019

Hi David, I am Noel would be interested in learning trading options, I stay in Dubai and work in a cyber cafe and now I plan to move to India after a year, would like to know if you can mentor me with your trading plans and strategies.

Sophia says April 2, 2019

Hi David! Cool Stuff and just like the rest of the gang here. I am interested to know how you do it in more details like a video or something. Please shoot me an email and looking forward to learn more from the master.

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Bartholomew says February 15, 2019

How good are you as a teacher? My wife will kill me if I waste anymore capital in options if I don’t get results after some more training.

    David Jaffee says February 15, 2019

    I work hard to exceed the expectations of all my students.

    Below is some recent feedback from students:

foloren torium says February 11, 2019

Utterly written content material, thanks for selective information. “Life is God’s novel. Let him write it.” by Isaac Bashevis Singer.

    David Jaffee says February 11, 2019

    Thanks for the comment

jerry mendelson says January 5, 2019

Getting $2.00 for $160.00 margin is about 1.25% in 6 weeks. How do you get 50% per year?

    David Jaffee says January 6, 2019

    Hi Jerry. How are you calculating margin? Also, how are you extrapolating out one specific trade to an entire year?

Ryan Alamgir says December 27, 2018

Hi would you please contact me at 571-991-5138? Thanks Ryan

    David Jaffee says December 28, 2018

    You can email me

Stephan Van Atta says December 26, 2018

I’m hoping to learn your strategies for the purpose of income replacement. Is it appropriate to think in terms of daily income? For example ‘I want to make between $200-$300 per day to replace my current income.’
Thank you
Stephan Van Atta

    David Jaffee says December 28, 2018

    I answered this via email

paul korn says December 19, 2018

what is your account worth today?

    David Jaffee says December 20, 2018

    Less than it was 3 months ago. I’ve mitigated losses by selling calls, but when the VIX increases from 10 to 26, it’s hard to not lose unless you continuously hold short delta.

      paul korn says December 28, 2018

      David, Please answer my question. Thanks

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