Hey there, fellow finance enthusiasts! Today, let's talk about making some moolah in the stock market! We're going to explore the wonderful world of selling puts and earning some extra pocket money.
Selling puts is like a bullish option. You think the stock price is heading up, so you sell a put to pocket the premium. Wah, sounds simple, right? But why sell a put instead of buying a call, you ask? Well, think about it – buying a call needs a big jump in the stock price, which can be like trying to find kopi-o in the desert! Not so likely lah! Selling a put, on the other hand, is like collecting rental income. Every day the option gets closer to expiring, you earn some ka-ching!
Okay, okay, let me give you the recipe for success – how to set up this put-selling trade and earn some $$$.
Step 1: Have a bullish thesis. Check if the news supports your hunch about the stock going up lah. Read the news, read the news! Keep up-to-date with the company's gossips to see if it backs your bullish story. Are people saying, "eh, this stock sure steady one, buy, buy, buy!"?
Step 2: Now, take a good look at the stock's movement. We got lots of indicators to help us see the pattern. If the stock price is above the 50-day MA, then wah, it's a bullish trend, man! But if it keeps going below previous lows, like trying to limbo under the table, then maybe it's showing bearish signs.
Step 3: Set your target price, bro! Selling puts ain't no risk-free game, ah. But you can mitigate some of the risk by choosing a price you're okay to own the stock at, just in case. First, calculate the expected move of the stock price – got formula one. Take the (Stock price) x (IV/100) x [square root (DTE/365)] = Expected Move ! For example, if TSLA's stock price is $254.11, the IV is 48, and DTE is 8 days ; 254.11 x (48/100) x [square root(8/365)] = +- 18.06 , then the expected move is around $18.06 lah. Easy peasy, right? Just choose a price below this expected move, and check if there's any support at that level. Like for TSLA, if there's a low at $240.70 (see attached chart )and it's above the 50-day MA (red line), then TSLA should stay above $236, lah!
Step 5: We can also check the options market put call ratio, like consulting the fortune teller, to see if the market agrees with our bullish vibes. A put call ratio of lesser than 1 means bullish, more than 1 means bearish.
If everything check, confirm plus chop, you can choose a price to sell that put, collect the premium, and start earning some sweet $$$ lah! Easy right?
So, there you have it! Go forth, my finance kakis, and make some money in the market with selling puts. Happy trading, and remember – don't forget to say "please" and "thank you" to the markets! Cheers! 🇸🇬😄
Comments
Any opinions on the article by LA Times that detailed the "Teddy Bear Test" done with a Tesla in FSD mode? The argument grows for incorporating next-gen Digital LiDAR into Tesla's designs.
The amount of money you can earn from a put-selling trade will depend on the strike price, the expiration date, and the premium that you receive for selling the option.
A put option gives the buyer the right, but not the obligation, to sell the stock to you at a specific price (the strike price) on or before a specific date (the expiration date).
Once you have found a stock, you would need to sell a put option on that stock.