Selling puts for income is exactly about the last statement: profits. Exactly what is the reason if it isn’t moneymaking? The target is being profitable using the method of selling puts.
On this page I exhibit the whole system for selling puts for income. I’ll detail every single step, starting with choosing the stock, moving on to choosing the right option, selling the put, and ultimately profiting. Be sure to explore the specifics and find out how I generated an annualized return of 75% within just a day.
I initiated this excellent trade on 9/8/2011.
Step # 1: Choosing the Company
We make use of graphs to help choose shares upon which we can easily sell puts in order to create rapid and easy earnings. Given that selling puts makes the most revenue when a company stays above the exercise value, I am seeking for a stock with sideways or trending up movement. In general, the long term moving average should be advancing higher, oscillating indicators really should be within the lower end on their runs, plus the share must be creating larger peaks and also higher lows. The stock with these characteristics will be at the minimum point in an uptrend – the proper spot to sell puts for income.
AAPL ended up being the stock which grabbed my eye currently. Through more recent market moves, the company bounced two times around the $360-$364 level . Then it commenced heading up and created a higher trough. The signals stated earlier were in line. In the last couple of days there was clearly a slight trough in the stock price, but bulls have come directly into the arena and forced the price up. This is a wonderful scenario meant for selling puts.
Step # 2: Selecting the Option
There’s always the balancing act whenever you are selling puts between several issues. We want time to generally be as limited as it can be, that decreases the income we obtain yet increases safety. You want the exercise price to be the maximum feasible without the need for placing your income in danger. So I wound up choosing the three hundred sixty five dollar exercise level, around 20 dollars under the current market price. The option will terminate in a session, so the time could hardly be any less risky. I could truthfully have chosen the three-hundred seventy dollar exercise value, yet the added return simply is not worth the chance.
Step # 3: Sell the put for income
The seven day three-hundred-sixty-five dollar puts were sold for ten cents. This means that every single contract I sold produced $10 in revenue. Since I sold twenty contracts, the entire profit was two hundred dollars. With the way the amount of cash required works for selling puts, I made a 0.3% gain over a one day position. Annualized over 250 trading days, that’s a seventy five percent gross annual profit on the investment!
Step # 4: Profiting by Selling the Put
The two strategies to cash in on a sold put. You can purchase the put back for less than you formerly sold the option for or else you can let the contract expire worthless. In this transaction, Apple Computer remained very well beyond the strike price area, and so I kept the entire income.
Altogether, I had to spend approximately twenty minutes to find an appropriate company, 5 moments to choose an option, and a couple minutes to enter a order. The entire procedure was completed in around half-hour (a lot less than I had to spend to create this informative article!). Do you want to invest half an hour to create $200?
I have been in the stock markets for over 10 years. I have made Selling Puts for Income to share his knowledge about this mostly unknown technique. Use Selling Puts for Income to profit today!. Free reprint available from: Selling Puts For Income – The Way I Made a 75% Profit In A Single Working Day.