Selling Put Options - Get People To Pay You Money To Buy Stocks - Easy Method

About this video

• Video Title: Selling Put Options - Get People To Pay You Money To Buy Stocks - Easy Method
• Channel: Lee Lowell - The Smart Option Seller
• Speakers: Lee Lowell
• Duration: 00:30:02

Overview

This video explains how to sell put options as a strategy to generate income and potentially acquire stocks at a desired price. The presenter, Lee Lowell, outlines a five-step process and illustrates it with a Tesla example, covering the mechanics, risks, and potential returns involved in this options trading strategy.

Key takeaways

• Sell Put Options Strategy: The core concept is to sell put options, which obligates the seller to buy shares of a stock at a predetermined price (strike price) if the stock falls below that level by the expiration date.
• Get Paid Upfront: Selling a put option results in receiving an immediate premium payment from the buyer, effectively getting paid to agree to buy the stock.
• Five-Step Process:
  1. Pick a stock you are bullish on and want to buy.
  2. Decide on a comfortable purchase price (strike price).
  3. Examine option chain prices for various expiration dates at your chosen strike price.
  4. Sell the put option and collect the premium.
  5. Wait until expiration to see the outcome.
• Two Potential Outcomes:
  • If the stock price is above the strike price at expiration, the option expires worthless, and you keep the premium.
  • If the stock price is below the strike price at expiration, you are obligated to buy 100 shares of the stock at the strike price, but you also keep the initial premium.
• Risk Management and Margin Accounts: Selling put options involves risk, as the stock price could continue to fall after you are obligated to buy. The video touches on the need for a risk management plan and explains margin accounts, which allow for lower capital requirements compared to cash accounts by only holding a fraction of the potential obligation.
• Probability and Out-of-the-Money Options: The video discusses using probability calculators and option chain "delta" to assess the likelihood of a stock falling to the strike price. Selling "out-of-the-money" put options (where the strike price is below the current stock price) generally offers a higher probability of the option expiring worthless.