How I Sell Puts Weekly To Generate Passive Income

Are you looking for a reliable strategy to generate passive income in the options market? Today, I want to share with you one of my favorite strategies for generating passive income: selling puts. It’s a straightforward approach that can yield impressive results, making it an excellent addition to your trading arsenal.

The Power of Selling Puts

Selling puts is a strategy that thrives in both up-trending markets and during market pullbacks. It involves selecting a strike price (the level at which you’re comfortable buying the stock) and collecting premium by selling put options. As long as the stock price remains above your chosen strike price until expiration, you keep the premium as profit.

The Mechanics of Selling Puts

The process of selling puts is simple and beginner-friendly. You start by identifying a level you believe the stock won’t fall below (your strike price). Then, you sell put options with a corresponding expiration date and strike price. If the stock price stays above your strike price, you profit. This strategy allows you to make money whether the market goes up, sideways, or even experiences a moderate downturn.

Key Elements of My Weekly Put-Selling Strategy

To maximize the effectiveness of this strategy, I’ve fine-tuned my approach over time. Here are some key elements I incorporate into my weekly put-selling strategy:

1. Targeting 90 Days Until Expiration (DTE): I aim for options contracts with approximately 90 days until expiration. This timeframe strikes a balance between premium collection and decay rate, minimizing gamma risk.
2. Selecting a Low Delta: I typically target a Delta of 7 to 10, which allows for a wider margin of safety in case of market pullbacks.
3. Implementing Profit and Loss Targets: I set a take-profit level at 25% of the premium collected and a stop-loss level at 400% to manage risk effectively.

Mitigating Risk and Automating the Strategy

While selling puts can be highly profitable, it’s essential to manage risk proactively. Here’s how I mitigate risk and automate my strategy:

1. Utilizing Trending Band Indicators: I employ trending band indicators to identify optimal entry and exit points. By exiting positions when the market hits the upper band, I can avoid significant downturns and preserve capital.
2. Setting Account Size Limits: I ensure that my stop-loss amount does not exceed 10% of my account size, maintaining prudent risk management practices.
3. Automating the Strategy: I utilize an auto-trader tool to execute my weekly put-selling strategy efficiently. This tool allows for customization of parameters such as strike price, expiration date, and frequency of trades, streamlining the process and maximizing returns.

Embracing the Power of Passive Income through Put Selling

Selling puts weekly can be a lucrative strategy for generating passive income in the options market. By understanding the mechanics of put selling, incorporating key elements into your strategy, and mitigating risk through proactive measures, you can harness the full potential of this approach. Whether you’re a seasoned trader or just starting, consider adding weekly put selling to your repertoire and watch your income grow steadily over time.

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Thanks for reading 🙂
Austin Bouley