8 Reasons Selling Option Premium For A Living Is Possible

8 Reasons Selling Option Premium For a Living Is Possible

Discover why selling option premium for a living is the best way to make income for traders.

There is so much competing information, that we get confused. As a result, we spend our time and energy investing in less attractive alternatives. But I'm here to tell you that you selling option premium for a living is possible.

Some people try to make quick money by getting involved in day trading scams; they usually end up losing most of their money with frauds and scammers.

Selling Option Premium Key Points

  • Selling option premium (primarily selling puts) has a high probability of profit
  • You can consistently make small profits that, with time, compound into much larger gains
  • Financial advisers almost always perform poorly, but people tolerate it because they believe they cannot manage their own money plus they don’t want to assume personal responsibility for their investment decisions
  • People also mistakenly believe that selling option premium is risky, yet it’s much less risky than most other types of investments (including buying & selling stocks) - as long as it's done correctly and with discretion.

The 8 Reasons Why Selling Options is Best

  • Easy to get started – There are few barriers to entry. You can open an account in a few hours and begin learning a skill by dedicating just a few minutes a day. Read this post to find the best online brokerage.
  • Earn money from anywhere – A smartphone is the only required equipment. You can be location-independent and make money while traveling (as long as your phone is able to connect to the internet).
  • No selling required – There’s no need to create a website, generate leads or sell a product. You don’t need to spend time marketing, blogging or building a team.
  • High probability of profit – Options have a high probability of expiring worthless; the few trades that don’t expire worthless can usually be managed and closed for a profit or a small loss.
  • Minimal time investment – You can spend just a few minutes a day monitoring your positions and placing trades.
  • Many people find trading enjoyable – You can be your own boss and take control of your financial future. You will gain insight into human behavior and learn a skill that can be used for life. Also, it’s very easy to learn as long as you don’t overwhelm yourself with unnecessary information.
  • It’s scalable and can be incredibly lucrative – Whether you have $2,000 or $10,000,000, you don’t need any employees nor do you have to change your methodology as your assets grow (you can simply trade more contracts). Plus, with the power of compounding, you can become incredibly wealthy.
  • Liquidity – When buying or selling a house, the process takes months and there are numerous fees that must be paid. When selling options, the trade is executed instantly and the cost is minimal.

Stop Chasing "Easy Money"

Before we get into the reasons why selling option premium and trading options is the best way to increase your income, I want to reiterate that this is not a get-rich quick scheme.

You will not have trades that are huge winners, instead you’ll have a large number of trades that are small winners.

Some trades will lose money, but as long as you don’t get greedy by trading too many contracts, then you’ll be okay.

The goal is to ensure that, if you have a losing trade, that you limit losses.

People who chase easy money usually end up losing everything.

It’s important to think long-term.

You can get rich slowly by trading options, or… you can try to get rich quickly via other trading schemes and end up not losing money.

Be patient and build good habits. If not, then fraudsters (like Tim Sykes) will exploit your greed and take your money.

In the stock market, there is no secret strategy that will achieve massive returns; anytime someone proclaims that they’re special, or that they’re a guru, you should run because trying to make quick money usually results in assuming significant risk and a costly, big financial mistake.

There are also educators who try to make things too complicated to validate their existence. Unfortunately, most of their students lose money. I believe this is the case with Option Alpha and Tastytrade.

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Learn to Sell Option Premium & Get Rich Slowly (But Surely)

What is option premium?

Option premium is the current market price of an option contract. It is the income received by the seller (writer) of an option contract to another party. Out-of-the-money options' premiums consist solely of extrinsic value.

Selling option premium is the only strategy that I have come across where the odds are substantially in your favor; it’s the easiest way to rapidly increase your wealth.

Many people are selling option premium for a living 

To make consistent money in the stock market, you must be the casino and not the gambler.

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Mistakes Options Traders Make

When trading options and selling option premium, people get in trouble when they become greedy and sell too many contracts. 

They also run into trouble when they hold out hope that a losing position will become a winner instead of proactively managing the position.

As long as you trade highly liquid underlyings, and keep your number of contracts low, you shouldn’t suffer large losses (although you will need to proactively hedge your positions to eliminate tail risk).

Regarding trading psychologically, losses are much more powerful than gains.

As a result, do yourself a favor, and avoid trading too big (too many contracts).

Almost all of the horror stories that are associated with options trading can be attributed to trading too large. When deployed correctly, selling options (selling premium) is substantially better than buying and holding stocks.

Overall, the market “goes up” around 53% of the time, yet you can sell options that expire worthless ~85% - ~90% of the time, with less risk & volatility when compared with buying stocks.

The primary reason options traders lose money is because they get greedy and trade too many contracts and fail to proactively hedge their portfolios.

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Selling Option Premium Conclusion

What is option premium? Collecting and selling options premium is the best way to increase your income.

Many people are selling option premium for a living 

It doesn’t require a substantial time investment, there is no need to create a product or pay for advertising.

Plus, the profit potential using selling option premium strategies is substantially higher than most other strategies.

The financial services industry does not want you to manage your own money. 

They make their customers feel inferior yet financial advisers almost always performs poorly.

The next time a financial adviser gives you advice, you should ask them for their brokerage statement.

Advisers leverage the brand equity of their employer for individual credibility,  but the reality is that most of them are in worse financial shape than their clients.

When managing your own money and trading options, overconfidence is the biggest reason why people suffer major losses (and they fail to hedge their risk as well).

Be careful not to trade too many contracts when selling premium so that you can be successful & substantially increase your wealth.

Many people are buying and selling option premium, but you should focus on selling option premium strategies (while proactively hedging).

I have found that those are, by far, the best.

How to sell option premium?

Well, it's quite easy, you can enroll as a student at Beststockstrategy.com/memberships

Frequently Asked Questions (FAQs)

What is an option premium?

Option premium is the price an option holder paid to purchase, or received by selling the option contracts.

In other words, option premium is the current market price of an option contract, and the amount the seller receives when their option is sold in the market.

Can you sell option premium for a living?

Yes, but only if you have a large account. I would estimate you'd need an account of $100,000+ with Portfolio Margin to be able to support yourself by selling options.

Can I sell options for income?

Yes, selling options for income is a great trading strategy. I utilize a hybrid system where I sell puts on stocks that I want to own. I usually do not sell calls on the stocks that I own because it limits the upside potential of the stock.

Can I sell call options without owning stock?

Yes, you can. You'd want the stock to trade below the call strike at expiration so that you can keep the premium.

What is the best option selling strategy?

The best option selling strategy is to sell put options on large-capitalization stocks with strong brands that you want to own. You can sell puts that are ~10% - 15% below the current market price.

You also need to proactively hedge your portfolio to eliminate tail risk.

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 DavidJaffee.com.

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Leave a Comment:

21 comments
Trader says October 17, 2020

Thanks. Great article about how to trade options.

Reply
Story says October 2, 2020

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Bianca says June 11, 2019

My partner and I absolutely love your blog and find nearly all of your post’s to be just what I’m looking for.
Do you offer guest writers to write content for you?
I wouldn’t mind creating a post or elaborating on some of the subjects you write in relation to here.

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Reply
    David Jaffee says June 12, 2019

    I don’t offer guest writers / guest posts.

    Reply
Review says June 1, 2019

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I appreciate you sharing this with me as we speak.

Reply
George says April 9, 2019

What do you recommend for one that has 500-1000 to trade with? Is selling premium a good starting place or is selling naked calls/puts a better place to get started to grow the account?

Reply
    David Jaffee says April 9, 2019

    You’ll need at least $2,000 to sell options with margin

    Reply
Results-nic.in 2019 says March 17, 2019

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    David Jaffee says April 9, 2019

    Okay

    Reply
folorentorium says February 10, 2019

Very interesting subject, thanks for posting. “The great aim of education is not knowledge but action.” by Herbert Spencer.

Reply
    David Jaffee says February 11, 2019

    Thanks. I agree. Taking action is very important.

    Reply
Sk Noon says December 4, 2018

Hey David,

I’ve been following you recently on Youtube and have been finding your series pretty insightful and straightforward unlike other stock “teachers” online.

Do you have a recommended minimum for people option trading? Right now, I’ve just been getting my feet wet playing with low cost options before committing more than $5,000. I rather lose $20 playing around before I start putting in real money. Aka, I think your videos are helping with my bad YOLO and FOMO calls.

I’ll be signing up soon!

Reply
Adit Rustagi says November 20, 2018

Hi David,
How much of your buying power are you actually using on a given trade?
Secondly at a given point in time how much of your buying power do you keep in reserve for adjustments ?

Reply
    David Jaffee says November 21, 2018

    Hi. I discuss both questions in-detail in the Education course. I always recommend keeping at least 40% of your account available in buying power.

    Reply
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