earn 1%$70 usd every 5 week
Selling amazon put options$71 Strike price (25% buffer) in the event amazon falls below $71 I am prepared to pick it up at $71 and sell call options at $70 doing the wheel strategy of keep selling put and call options
I am thinking of selling amazon put options dated5 or 6 weeks later earning around 0.70 for this time which is around 1% of the strike price of $71
Do like comment and repost my article
@TigerEvents @TigerStars @Daily_Discussion do feature me so people can learn sell put on the way down and earn 1%
Do enjoy the article
I am also dollar averaging 3 to 5 shares of amazon every month when I have some vouchers To claim from predictions and tiger games
I bought high at 93 now $Amazon.com(AMZN)$
I am thinking Of slowly accumulating so I have 90shares to sell a call and buy the remaining 10
If I am selling in the money below strike call I might only need 80 as the premium paid is even more
A short put is a bullish strategy that involves selling a put option. In options trading, short describes selling to open, or writing an option. If assigned, selling a put obligates you to buy 100 shares of the underlying stock or ETF, at the strike price by the expiration date. As the seller, you have no control whether or not your put is assigned—the buyer decides whether or not to exercise the option.
At Robinhood, you must have enough buying power to purchase 100 shares of the underlying stock for each put you sell. This is a cash-secured put because the potential purchase of shares is secured by cash in your account. In exchange for selling the put, you’ll collect the premium paid from the option’s buyer. Although you receive a cash credit at the outset, your potential profit or loss is not realized until the position is closed.
When to use it
A short put is a bullish strategy. You might consider using it when you expect the price of the underlying stock to increase moderately before a certain date. Many options traders sell a put as a way to acquire stock. Although it may not be your primary goal, you could end up purchasing 100 shares of the underlying at the strike price. A short put has a risk profile that’s almost similar to owning 100 shares of stock. If that feels too risky, a short put may not be the right strategy for you. If the stock begins to drop below your short strike, you can mitigate assignment risk by buying back the short put, but this is typically done at a loss. If you’re extremely bullish, buying the underlying stock or a call option may provide a more desirable profit potential compared to selling a put.
Building the strategy
At Robinhood, you must have enough buying power to purchase 100 shares of the underlying stock for each put you sell. Start by picking an underlying stock or ETF, select an expiration date, and choose a strike price. Typically, a short put is opened by selling an out-of-the-money option. Once you’ve selected a put to sell, choose a quantity, select your order type and specify your price.
When selling a put, the closer your order price is to the bid price, the more likely your order will be filled. If you prefer to work your order, you can choose a price that is closer to the mid or mark price (halfway between the bid and ask prices). It’s possible you might get a fill, but more likely, you may need a buyer to increase their bid.
Confirm your order details, and when you’re ready, submit the order.
The goal
A short put is commonly used to generate income. When selling a put you want the option to decrease in value. This happens when the underlying stock price rises, time passes, and implied volatility drops. As with most short option strategies, the goal is to sell high and buy low.
Prior to expiration, if the option is worth less than your original selling price, you can attempt to close it for a profit. If you hold the position through expiration, and the underlying stock is trading above the strike price of your short put, it should expire worthless, and you’ll keep the full premium.
Cost of the trade
When you sell a put option, you’re required to put up enough cash collateral to cover the potential purchase of 100 shares of the underlying. In exchange, you collect a credit for selling the put. For example, if you sold the $50 put, you’d need $5,000 to open the position ($50 x 100 shares per contract). Let’s say, you sell a put for $2. Since a standard option controls 100 shares of the underlying, you’ll collect $200 to sell one contract. You’d collect $2,000 for selling 10 contracts (but would have a larger cash collateral), and so on.
Factors to consider
Look for an underlying stock or ETF whose price is trending up or likely to increase soon. Consider one on the higher end of its implied volatility range, with potential to decrease over the life of the trade. It may be advisable to look for underlyings with more liquid options that have tighter bid/ask price spreads, larger volumes, and plenty of open interest.
Choose an expiration date that optimizes your window for success. When selling puts, traders will most often look at options expiring in 30-45 days. This timeframe provides a good balance between the collected premium and the rate of time decay, which begins to increase at 45 days to expiration. If you sell an option with fewer days to expiration, the rate of decay will be even greater, but the amount of premium may not be enough for some to justify placing the trade. Meanwhile, if you sell options with a longer expiration date, the premium will be greater but the rate of time decay will be minimal until that option gets closer to expiration.
When selecting a strike price, the most common approach is to sell an out-of-the-money option. Out-of-the-money puts are when the strike price is lower than the underlying stock price. A short put can be profitable if the stock price rises, stays where it’s at, or drops slightly (as long as it stays above your short strike by expiration). If you choose an expiration date that is further out, it may be advisable to sell an option that is further out-of-the-money, providing more room for the stock to fall given the extended time frame.
Important: It’s best to avoid selling an in-the-money put option. An in-the-money put is when the strike price is higher than the underlying stock price. Although you’ll collect more premium up front, you may be at risk of an early assignment.
Often, traders will decide how much premium to collect by using a measurement called return on capital. Return on capital is calculated by taking the premium you collect and dividing it by the amount of collateral required to place the trade. It’s a way to assess whether the amount of collateral being held is worth the potential return over the time period of the trade. Ultimately, it’s up to you to decide your optimal return on capital. Remember, short puts can be a capital intensive strategy and smaller account sizes may not be able to use it.
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