Selling Puts Strategy: Discover The Best Selling Puts Strategy To Earn More
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selling puts strategy

Options Trading Strategies: Interested in Selling Puts? Best Comprehensive Guide

You will not earn money with options trading unless you execute this selling puts strategy that I will share with you in this post.

There is a lot of misleading information from fake gurus telling you that you can make money trading by memorizing three chart patterns, using technical analysis, forex trading, penny stocks and futures trading.

In my opinion, you will lose money with all of these trading techniques, products and strategies.

If I traded any of those strategies, I would lose money.

Day traders are fraud victims: It's scientifically proven.

Hopefully you are not engaging in self-destructive trading strategies so that you can learn how to trade options and be consistently profitable in all market environments.

Once you learn the best options trading strategies, you will realize that the only way to make consistent money in the stock market is by selling options (specifically, selling put options).

Can you make a living selling puts? 

Yes, you can. 

Selling Puts Strategy (Key Points)

  • Do NOT buy options (calls or puts) unless you want to be broke.
  • You must be committed to constant improvement and try to always reduce your risk if you want to maximize your returns.
  • Why don't people make money in the stock market? Because they lack patience and are not disciplined.
  • You should only trade options on market leading stocks like Facebook, Amazon, Lockheed Martin, JP Morgan etc. 
  • When you sell puts or calls on positions that are trading at price extremes, you are giving yourself an advantage by having a large safety net (and you also collect a lot of premium)

DO NOT Buy Call Options

Do NOT buy call options unless you want to be broke.

This is where I differ from many other traders because they encourage others to buy call options, which I don't recommend.

When buying options, you'll win 2 out of 10 times.

You will lose 8 out of 10 trades.

The losses will substantially outweigh the gains.

Insurance companies make money by selling insurance policies, they do not buy insurance.

The only way to make money in the stock market is by selling options, specifically put options, using the selling puts strategy I will share below.

A substantial percentage of my profits are generated generated from selling put options (both naked options and vertical credit spreads).

My goal today is to teach you the winning trading strategy that I always use so that you can begin selling put options for a living.

If you want to improve your trading skills then it's important to learn and build good habits.

My students make money trading options while also reducing their risk.

The winning selling puts strategy that I will reveal to you is free it's also a trading strategy which is incredibly valuable, many people make a living selling puts. 

Selling Puts for Income

It is best to sell puts and calls if you want to make a living by trading.

I mostly sell out-of-the-money vertical credit spread put options because it provides a substantial amount of protection.

I do not recommend that traders buy a put (or a call option).

By selling put options:

First, you're able to collect a large amount of option premium.

Second, you are inherently protected from selling too many contracts when selling vertical credit spreads because your buying power is already reduced by maximum loss.

Third, when a position is challenged, it is easy to roll and manage it.

In general, I recommend trading vertical credit spreads, instead of naked options because you have downside protection and spreads are more capital efficient.

I also do not recommend that options traders sell in the money puts.

I believe it's important to sell vertical credit spreads during low volatility environments to protect against a large correction and volatility expansion (you can sell naked puts during times of elevated IV - when the VIX is trading over 25).

Traders should avoid selling too many vertical credit spreads due to the smaller buying power reduction - you don't want to be in a situation where you'd be unable to take assignment.

As a result, I recommend avoiding the temptation of trading too many contracts and selling vertical credit spreads when the VIX is below 25 and then sell naked puts when the VIX is trading above 25.

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Selling Puts Strategy: Naked Puts vs. Vertical Credit Spread

Let's say you wanted to sell a put on Facebook at a strike price of $145 and then you also bought a $140 put (so that you turned the trade into a spread), your total selling puts risk is $5 / share.

Because the buying power reduction is so much smaller for the spread than it is for the naked option, many people get greedy and end up selling 5x - 10x too many spreads.

People are very bad at disciplining themselves. In fact, I would say that most people are self-destructive. 

If an options trader were to sell 5 naked options, they might trade 30 spreads to compensate for the reduced premium.

If Facebook falls to $143, the trader may get assigned those 30 contracts and because their account isn't large enough, they would have to close the positions for a large loss.

It's easier to roll naked positions because you don't have to constantly buy the lower-priced put option; additionally, you can use the premium that you receive when rolling the position to improve the basis, or reduce the size, of your naked option position.

Even so, I recommend trading spreads because it reduces your selling puts risk and protects you from large moves in the stock market.

Spreads are a defined risk trade. Vertical credit spreads are also more capital efficient.

While both spreads and naked options are fine, I prefer spreads.

"If you want to live the best life, you must commit yourself to constant improvement and developing healthy habits." - David Jaffee, BestStockStrategy.com

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Selling Puts Strategy: The Best Way

What should you do today to earn an income by selling puts?

Many people are selling puts for income and generate monthly income by selling puts.

As I mentioned, 80% of my trading profits are earned from selling put options.

I will now reveal to you the selling puts strategy (selling puts options) you can utilize to make money by trading.

Remember: You should only trade market leaders like Facebook, Amazon, Lockheed Martin, Goldman Sachs, etc.

If you have an account size below $100,000, you should trade a maximum of 2 - 3 underlyings at a time. 

For example, you can choose Facebook and PayPal or Amazon and JP Morgan.

In general, I want the underlyings to be in different industries, that way I have industry diversification.

If your portfolio size is less than $10,000 you should trade a maximum of 1 -2 underlyings at a time.

Keep it simple.

I have a multi-million dollar account and I only trade and have positions on  5 - 6 underlyings at a time.

Selling puts example:

Let's say Facebook is trading at $165 at this moment. You should look at the trading range of where it's been trading over the past three or four weeks.

Let's say that Facebook has mostly been trading between $160 and $170.

What you can do is wait for Facebook to trade close to ~$160, then you sell an out-of-the-money put spread with strikes around $148 / $140.

You'd choose an expiration date that is around six weeks out, collect around $1.20 per share of $120 per contract, and there is ~95%+ probability that this trade would expire worthless and enable you to keep the premium.

In general, we would not wait until expiration and we prefer to close out our positions early.

So in the example above, we would probably close out that position once the puts are trading around 40 cents a share.

Here's an important takeaway from this selling puts strategy:

Why doesn't everyone make money in the stock market?

Because most people are self-destructive and NOT disciplined enough to manage risk.

Be patient and invest in themselves to learn valuable skills.

In the selling puts example above, most traders would not be able to wait for Facebook to fall to ~$160, instead they would enter the trade at a vastly inferior entry point.

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Selling Puts Advantages

  • Selling puts allow you to collect the most amount of premium.
  • I recommend put spreads because it offers protection against large volatility swings and corrections in the stock market.
  • When a naked put position is challenged it is easy to roll and manage it.
  • Sign up for Trade Alerts – Receive real-time trade alerts so that you maximize your profits and minimize your mistakes; we have a Trial Offer of $19 for 7 days.

How I made $50K Selling Puts when Facebook Crashed (July 2018)

I made $50,000 when Facebook fell from $218 to $175.

I made this money because I was patient.

Prior to falling, Facebook increased in price virtually every day after it had risen above $180.

While its price was going up, I was disciplined and left it alone (waiting for a pullback).

Once Facebook fell from $218 to $175, I sold the $150 strike puts and collected a large amount of premium.

In general, I am very patient when entering new positions.

If a stock does not provide a good entry point, then I will not open a new position.

Since Facebook continuously increased in price from $180 to $218, and there was no pullbacks, it was easy for me to not trade it and, instead, focus on other opportunities. 

You have to be very disciplined when trading options.

And you have to commit yourself to constantly reinforcing positive habits. 

"Selling vertical credit spread put options is your best way of making consistent profits in the stock market." - David Jaffee BestStockStrategy.com

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Conclusion: Selling Puts Strategy

Selling vertical credit spread put options is your best way to make consistent profits in the stock market.

Learn from this selling puts strategy comprehensive guide and apply it to your trades so that you can begin selling puts for income and generate monthly income by selling puts. 

Avoid selling puts with inferior brokers such as, in my opinion, Robinhood. I would also not recommend selling covered puts (holding stock is not an efficient usage of capital).

If you want to learn about more options trading examples, enter your e-mail address below and receive $400 worth of free training. 

According to my readers, these free materials are significantly better than anyone else's paid materials. 

If you have questions, leave them in the comments section below and I will be sure to answer . Thank you!

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​. 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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Leave a Comment:

34 comments
David Batrum says July 15, 2020

This article is great!

Reply
Dr Steven Krahl says July 1, 2020

Mr Jaffee, this is a serious question, can we discuss you being my mentor and the opportunities that can arise from the relationship? Hope to hear from you. Thank you.

Reply
    David Jaffee says July 2, 2020

    ok

    Reply
MARK HERNANDEZ says June 30, 2020

david i have think or swim paper money
i practice but dont have the slightest clue what im doing.
i really need to start from the bottom.
i make tunnels for a living,so talk about starting some thing new ,i love it.
hope i here from you.thanks mark

Reply
Kathryn Joseph says February 16, 2020

Hi- I have been selling naked puts for a few years and do well, but want to branch out a bit to more stocks besides AMZN, NFLX, ROKU, ADBE…I pretty much stick to weekly or two week trades. Does your program send specific alerts or do I have to go down lists and look for which fall within a certain criterion etc. I don’t like searching for new opportunities much. Right now I make about $1000 – $1500 per week and sometimes have to wait a month or more to close a trade if it goes against me by rolling it and reducing it, all things you write about, to still gain not lose.
Thanks
Kathryn Joseph

Reply
    David Jaffee says February 17, 2020

    Hi. You emailed me as well and I answered this via email.

    Reply
Ricki Knellinger says February 10, 2020

This blog about The BEST Selling Puts Strategy To Earn Trading
Income [David Jaffee]. has helped me enormously,
is a very good topic.

Reply
Lena Kocik says February 7, 2020

This blog about The BEST Selling Puts Strategy To Earn Trading Income [David Jaffee].
has helped me enormously, is a very good topic.

Reply
Frolep rotrem says January 21, 2020

I’m very happy to read this. This is the kind of manual that needs to be given and not the accidental misinformation that is at the other blogs. Appreciate your sharing this greatest doc.

Reply
Put Selling says September 18, 2019

Really, there have lots of matters in the selling puts strategy and most of the people don’t know properly that how they invest and become beneficial so they must need to take a course of put selling to maintain the strategy.

Reply
    David Jaffee says September 18, 2019

    Thanks for the comment.

    Reply
Roman says August 3, 2019

I really like this example and your content. I wanna sell puts in my Roth IRA and they would be cash secured since I can’t use margin. Do you think that’s still a good idea?

Reply
    David Jaffee says August 4, 2019

    It’s not a bad idea. I would recommend a margin account though.

    Reply
forex fury download says July 19, 2019

Very informative, thanks for keeping us up to date pertaining to your
trading development.

Reply
Laurine Cool says July 13, 2019

Hi there, great post! I was hoping you could help me with something. I was wondering, I’m curious the difference between insider trading and a trading scheme. Do you know the difference? I really appreciate any advice you can give.

Reply
fury ea says July 12, 2019

Very educational, thank you for keeping everyone up to date relating to your investing development.

Reply
Jennifer Birnie says July 7, 2019

Very insightful, thank you for keeping everyone up-to-date
on your investing strategy

Reply
nation says June 29, 2019

Very useful, nice one for keeping us all up to date relating to
your trading success.

Reply
Robot Nation says June 15, 2019

Many thanks for this, I’ll go ahead and absolutely readily share it with my customers.

Reply
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Reply
    David Jaffee says May 1, 2019

    ok

    Reply
JP says April 26, 2019

David, first I like your site and style. Your recent blog on success is great and your review on Options Alpha is interesting to say the least. That said, I’ve tried selling options several times over the last 15 years. I also used a couple of managed fund to trade them…both had huge losses in Feb/Mar 2018 (one went belly up…ouch).

The problem I’ve seen are
(1) It works until it doesn’t. You sell some nice naked puts or spreads during, say 3-10% pullback in the market. After some wins you try again and suddenly the market keeps falling another 10-15% (happened twice in 2018) or even 40%+ (2008 and dot-com bust a few years before). During those times, you either suffer huge losses or try to adjust your way out of it…which still often results in huge losses unless your timing/luck is incredible.

2) You also have to wait and wait if the market doesn’t have meaningful pullbacks (2019 so far, the late 1990s, most of the time when the market rallied between 2009-2017). How do you make money when the market remains bullish and non-volatile for long periods?

Reply
    David Jaffee says April 26, 2019

    Hi. Great comment. I don’t have all the answers. My thoughts are as follows:

    1) If Feb or Dec 2018 caused massive losses then… you traded too big and too aggressively.

    Many people (not me) actually made money in those months.

    2) I don’t think there’s any other way to trade than to pick your spots and be patient.

    You’re also reducing risk by being patient.

    I trade much less frequently than I used to, yet my results are the same (and I have less stress).

    If you’d like to discuss, you’re welcome to book a call https://beststockstrategy.thrivecart.com/30-minute-call/ or take the alerts at https://beststockstrategy.com/memberships/

    David

    Reply
      JP says April 27, 2019

      Thanks very much for the response. Do you mind saying what you netted in 2018? Your home page mentions your 2017 profits and shows a statement for July 18. Did you have an overral profit in 2018 despite down months like Feb, Oct and Dec? Thanks.

      Reply
        David Jaffee says April 27, 2019

        Overall, I was up around 12% in 2018. However, I was up 40% heading into Q4 and lost a decent amount in Q4. The January 2019 volatility contraction allowed me to recoup almost all of the Q4 losses.

        Reply
Keith says April 12, 2019

Why are you against covered calls? Isn’t that selling options too?

Reply
    David Jaffee says April 12, 2019

    I’m not against selling covered calls, except it’s not capital efficient. You should choose the best strategy, not a “decent” one. Selling covered calls is decent.

    Reply
Michael says April 8, 2019

I’m ready to sign up but I don’t understand how you send your live daily trades and comments.

Reply
    David Jaffee says April 8, 2019

    Hi. I just sent you an email.

    Reply
James says April 2, 2019

Hi David, I love your strategy ! I just used it to sell a put on LockheedMartin. On 28 March, I sold the $275 May 17 put for $3.00 (stock was trading at $294) I bought it back on 2 April for $1.30 (stock at $306). Thanks !

Reply
    David Jaffee says April 3, 2019

    Great job on the LMT trade, I sent a similar trade to my trade alerts subscribers.

    My trade alerts students receive profitable trades all the time. You may want to consider joining.

    Reply
mark says March 24, 2019

do you sell strangles, also are your put trades in the money and out of the money
thanks

Reply
    David Jaffee says March 24, 2019

    I do not sell strangles. I sell puts that are out of the money.

    Reply
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