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2023-06-18

How to cash secured puts. 

@Optionspuppy：Title: Unveiling the Art of Selecting Strike Prices for Selling Cash Secured Put Options on $Alphabet(GOOGL)$ Introduction: In the world of options trading, one strategy that can be employed is selling cash secured put options. This strategy involves selling a put option on a stock you would like to own, with the intention of generating income and potentially acquiring the stock at a lower price. The key to successful execution lies in selecting the appropriate strike price for your cash secured put options. In this article, we will delve into the art of choosing strike prices, focusing on the merits of selecting strike prices that are 10% to 15% below the current market prices and opting for options with a one-year timeframe. Understanding the Strategy: Before we dive into strike price selection, let's recap the basics of selling cash secured put options. When you sell a put option, you are essentially giving someone else the right to sell you a stock at a predetermined price (strike price) within a specified timeframe. In return, you receive a premium, which is yours to keep regardless of whether the option is exercised or not. If the stock price remains above the strike price until the option's expiration, you keep the premium and no further action is required. However, if the stock price falls below the strike price, you may be obligated to purchase the stock at that price. Choosing Strike Prices: One crucial aspect of selling cash secured put options is selecting an appropriate strike price. The strike price determines the level at which you are willing to purchase the stock if the option is exercised. A general guideline for strike price selection is to aim for prices that are 10% to 15% below the current market price. This range provides a buffer and allows for potential market fluctuations while still offering an attractive entry point for the stock. The Benefits: There are several advantages to selecting strike prices that are 10% to 15% below the current market price. Firstly, it increases the probability of the option expiring worthless, allowing you to keep the premium as profit. By choosing a strike price below the market price, you provide yourself with a cushion against potential price drops. Additionally, if the stock does get assigned to you, the lower strike price ensures you acquire the stock at a discounted price, thereby enhancing your potential returns. Potential Profits: The percentage profits in selling cash secured put options depend on the premium received and the strike price selected. Let's consider an example using Google, which is currently trading at $125. Assuming you select a strike price of $115 for a one-year option with a premium of $10, your cost basis would be around $105 ($115 strike price minus $10 premium). If the option expires worthless, you retain the $10 premium as profit, which translates to a percentage return of approximately 9.5% ($10 divided by $105). If the option is exercised and you end up acquiring the stock at $115, your potential profit would be realized if the stock appreciates beyond your cost basis. Comfort Level and Risk Management: The strike price you choose should align with your comfort level and risk management strategy. By selecting a strike price that is 10% to 15% below the current market price, you give yourself a margin of safety and mitigate potential downside risks. This approach allows you to build positions in high-quality stocks at attractive prices while managing your risk exposure effectively. Conclusion: Selecting strike prices for selling cash secured put options is an art that requires careful consideration. Opting for strike prices that are 10% to 15% below the current market price provides a buffer against price fluctuations and offers an attractive entry point. The benefits include increased probability of retaining the premium as profit, potential discounted acquisitions of stocks, and the ability to manage risk effectively. By adhering to these principles and align 🐯 🐯🐯🐯🐯🐯 Dear tiger readers Please help to share post also clicking the repost button and follow me as I published my post on my ideas and trading experiences and sometimes including my current dividend positions and winning sell call and put trades . 🦁🦁🦁🦁🦁Do follow me share my posts regularly So more people can learn about my trading methods and winning trades on selling covered calls and puts options I share my options trade below usually I sell at a higher price then buy back at a lower price for a profit I 🌈🌈🌈🌈🌈🌈🌈🌈 As always do your on due diligence and tradings have risks Do feature me @MillionaireTiger @MillionaireTiger @TigerStars @Daily_Discussion @nerdbull1669 so more people learn sell cash covered put on good stocks and earn 1% or more per month
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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