Discover why selling option premium is the best way to increase your income.
It also discusses some of the misconceptions that prevent people from getting started.
There is so much competing information, that we get confused.
As a result, we spend our time and energy investing in less attractive alternatives.
Selling Option Premium Key Points
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.
Chasing "easy money" will leave you broke. Learn practical skills that you can monetize and your chances of getting rich are much higher.
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.
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.
Reasons Why Selling Options is Best
Become a Successful & Profitable Trader
Follow My Trades with Real-Time Trade Alerts
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.
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.