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Why Selling a LEAP Put on IWM at $250 Earned Me $600 and Built a Long-Term Edge
A Disciplined Trade with Strong Premiums 💰
A few months ago, I executed a trade that has been quietly rewarding me day by day—selling a LEAP put option on the iShares Russell 2000 ETF (IWM) at the $250 strike price. The premium I collected was $18.27 per share, or $1,827 for one contract. After a few months, the option has dropped to about $12.78, which means I am sitting on a realized gain of around $600 simply from the option losing value. This premium is the cornerstone of my return. It’s upfront cash that cushions my portfolio while also letting me control a much larger notional position with disciplined risk management.
This $600 return isn’t from guessing short-term market moves; it’s from allowing time to do the heavy lifting. By selling the put instead of buying it, I’ve positioned myself as the insurance provider—getting paid to take on the possibility of owning IWM at a lower price in the future.
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Theta Decay: Time Is My Silent Partner ⏳
One of the most attractive aspects of this trade is theta decay, which works in my favor every single day. The option currently has a theta of -0.05, meaning it loses about $5 per day per contract in time value. Since I am the seller, that $5 doesn’t vanish into thin air—it effectively transfers to me.
Options are wasting assets, and theta accelerates as expiration approaches. By entering this LEAP put trade, I have set myself up with a long runway where time steadily erodes the option’s extrinsic value. The beauty is that I don’t have to constantly trade or make frantic decisions. As long as I manage my risk, I can allow time decay to drip-feed profit into my account day after day.
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Understanding Delta: Assignment Probability 📉
The option currently has a delta of about -0.59, which tells me two things. First, it means the option behaves somewhat like being short 59 shares of IWM—if the ETF moves up or down by $1, the option price will move around $0.59 in the opposite direction. Second, and more importantly, delta gives a rough estimate of assignment probability. With a delta near -0.50, there is roughly a 50% chance I will be assigned and required to purchase 100 shares of IWM at $250 each.
This isn’t a risk to fear—it’s a responsibility to prepare for. If assigned, I would need to put down $231,730 to purchase the shares. That figure might sound intimidating, but I look at it differently: if the market does dip and I’m assigned, I’ll own IWM at a discount while already having collected $1,827 in premium. In other words, I would be buying into a diversified basket of small-cap stocks at an adjusted cost basis well below the original strike. That’s a win in my book.
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Why IWM Was the Right Vehicle 📊
IWM represents the Russell 2000, a broad measure of U.S. small-cap stocks. This sector tends to be more volatile than large-cap benchmarks like the S&P 500, which translates into richer option premiums. That volatility gave me the $18.27 premium in the first place.
By choosing IWM, I’m aligning with an asset that reflects the broader growth of small and mid-sized U.S. businesses. It’s not a single stock with binary risks like earnings surprises or product recalls. Instead, it’s a diversified index fund, which reduces idiosyncratic risk while still paying me handsomely in option income.
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The Risk-Reward Balance ⚖️
Every options trade has two sides: reward and risk. On the reward side, I’ve earned $600 in realized gains plus ongoing theta decay. On the risk side, I must prepare for assignment, which could mean buying 100 shares of IWM for $250 each if the market falls significantly. That would tie up $231,730 in capital.
But here’s the perspective I maintain: if the market stays above $250, I keep the premium and the contract expires worthless. If the market dips below $250, I get to buy a diversified ETF at a discount while already having pocketed substantial income. Either outcome is acceptable as long as I have managed my capital prudently.
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Why This Strategy Works for Me 🏆
Selling LEAP puts is part of my broader “Options Puppy” journey, where I focus on steady income through covered calls and cash-secured puts. The key is discipline: I only sell options on assets I am willing to own and at strike prices where I am comfortable buying. By taking the seller’s side, I turn option decay into my steady ally rather than my enemy.
This IWM trade embodies everything I strive for—income generation, disciplined risk management, and alignment with long-term market trends. Instead of chasing short-term speculation, I let probabilities, time decay, and sound fundamentals work in my favor.
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Conclusion: A Smart $600 and Growing 📈
Selling a LEAP put on IWM at $250 has rewarded me with $600 in premium decay so far, with more gains trickling in from daily theta. Yes, delta reminds me that assignment is a real possibility, and I must be ready with $231,730 if required. But that’s the beauty of the trade—I’m being paid today to take on a future opportunity.
This is why I love selling puts on ETFs like IWM. It’s not just about chasing income—it’s about positioning myself so that both possible outcomes are acceptable. Either I walk away with a steady income stream, or I acquire a valuable asset at a favorable price. To me, that’s intelligent investing in action. 🚀
@MillionaireTiger @TigerStars @Wrtd @MillionaireTiger @TigerEvents @Daily_Discussion @ZhukovHatesPepsi
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