Selling Options = Picking Up Pennies On The Highway?
BestStockStrategy.com – Options Trading with David Jaffee
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Selling Options = Picking Up Pennies on the Highway?

You may have heard this phrase before when it comes to options trading, but is it really true?

David Jaffee with BestStockStrategy.com shared his views on whether it's true that selling options is like picking up pennies in front of a bulldozer.

When selling options, it's all about sizing and reducing risk and minimizing portfolio volatility.

Remember that when trading options, it's best to sell vertical credit spreads to reduce your tail risk, and also to buy put options during periods of low volatility and when the market is overbought so that you can make money during a recession.

In reality, the downside of selling options is that you don't participate in the upside potential of the underlying stock.

However, as long as you're disciplined, then selling an out of the money put option carries less risk than buying stock. 

Also, consider what other alternatives you have. If you buy stock, your buying power is reduced by about 50% and you have no safety net (each dollar move down in the stock corresponds to dollar-for-dollar loss in your portfolio).

If you buy deep in the money call leaps (buying options), then you're going to tie up buying power for a long period of time and you can only make money if the price of the underlying stock appreciates substantially.

Selling options is similar to acting like a casino or an insurance company.  

Those who claim that selling options is like picking up pennies in front of a bulldozer simply don't understand how to properly mitigate risk.

David Jaffee with BestStockStrategy.com does not believe that selling options is similar to picking up pennies in front of a bulldozer with the right options trading strategy and risk management strategy. 

In fact, he believes that selling options is the best way to trade since it provides a high win rate as well as a trading strategy to make money in all market environments.

David Jaffee has taught more than 1,500 members how to win up to 98% of their trades by selling options and managing their risk when selling options.  

Learn more at BestStockStrategy.com and sign up to receive $400 of free options trading training material.

Frequently Asked Questions (FAQs)

Is selling options picking up pennies in front of a bulldozer?

No, but it's imperative that traders use tail risk mitigation strategies to reduce their portfolio volatility. When selling options, the maximum profit is the premium collected, but the maximum loss, when selling a put option, is substantially more.

As a result, the best way to reduce portfolio volatility is by purchasing put options - this will protect you from the volatility expansion and large selloffs that oftentimes hurt option sellers.

Is it smart to sell options for income?

Yes, selling options for income is one of the best stock market trading strategies, as long as traders control their tail risk to avoid the small percentage of non-winning trades from overwhelming the winning trades.

What is the best way to sell options for income?

The best way to sell options for income is to sell put credit spreads on large capitalization stocks, indices and ETFs.

About the Author David Jaffee

I (David Jaffee) help people become consistently profitable traders while minimizing risk. 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‚Äč. Finally, if you're looking to Land a Finance Job, then I've put together the best step-by-step course at LandaFinanceJob.com. My personal website is DavidJaffee.com.

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