Delving into options trading might seem daunting, especially with the plethora of warnings echoing from financial advisors. The narrative often revolves around risk, the gamble of losing money, and the unsuitability for the average investor. However, these cautionary tales are often regurgitated without personal experience, stemming from a reluctance to step outside conventional investment wisdom.

 

 

While brokers are mandated to issue warnings, it’s essential to recognize that options trading doesn’t solely entail complex strategies. A straightforward approach, such as selling puts, can yield profits that may defy conventional belief.

 

Breaking the Mold

 

Contrary to the ominous warnings, I’ve personally averaged a remarkable 45% annual profit over the last three years by employing a put-selling strategy. This isn’t a “too good to be true” scenario but rather a testament to the potential within options trading.

 

Selling Puts: A Grounded Strategy

 

Options trading, specifically selling puts, doesn’t necessitate a plunge into intricate tactics. It’s about adopting the right mindset as an investor. Here are some steps to shift your perspective:

1. Align with Dividend Stocks: Focus on selling puts against stocks you want to own, particularly dividend-paying stocks.
2. Strategic Strike Price: Choose a strike price at which you’re comfortable owning the stock if assigned.
3. Expiry and Premium Selection: Tailor your approach based on your account size. Opt for longer expirations for smaller accounts and vice versa. Prioritize premium collection.
4. Market Analysis: Assess the stock’s trends, supports, and resistances. Make informed decisions based on your bullish or bearish expectations.
5. Defend Your Premium: If the stock goes against your projection, have strategies in place to defend the premium, whether by rolling the option or accepting the stock.
6. Never Buy, Always Sell: Maintain a stance of selling options, leveraging time decay to your advantage.

 

Demystifying the Complexity

 

Contrary to popular belief, you don’t need an in-depth understanding of option Greeks or complex valuation principles. The focus should be on grasping the basics and utilizing them effectively.

1. Stock Watchlist: Create a watchlist of stocks you want to trade.
2. Broker Approval: Ensure you have the necessary approvals from your broker to engage in options trading.
3. Platform Choice: Opt for a reliable platform like ThinkorSwim or any other that suits your preferences.
4. Funding Requirements: Whether cash-secured puts or margin trading, have the necessary funds in place. If using margin, be cautious and ensure you can cover potential assignments.

 

Unlocking the Power of Options

 

Understanding puts is fundamental to this strategy. A put option grants the right to sell a stock at a specified price within a certain timeframe. By selling a put, you’re essentially receiving a premium, even if it means potentially buying the stock at a lower price.

 

Why Dividend Stocks?

 

The beauty of selling puts against dividend-paying stocks lies in their stability. Unlike volatile market panics, these stocks, typically from mature companies, tend to recover swiftly. Even if assigned, you’re acquiring a stock that pays dividends, turning the situation into a win-win.

 

Learning from Success Stories

 

Success stories abound in the options trading world. Look at self-made millionaires like Teddi Knight and “Karen the Supertrader.” Their journeys exemplify the potential within options trading when approached with a strategic mindset.

 

Embrace the Opportunity

 

Are you hesitant about venturing into options trading? Fear not, as many have successfully navigated these waters. Options trading, particularly selling puts against dividend stocks, offers a unique avenue to generate income and acquire quality stocks. Embrace the opportunity, learn the ropes, and embark on your journey towards a flourishing investment portfolio.

If you’re unsure where to start, feel free to reach out. I’m here to assist you in setting up trades, enabling you to build your money-making machine—one that collects dividends and options premiums.