hello everyone my name is henry and i've
been trading options for over eight
years now and in this video i'm going to
visually and comprehensively show you
put option trading
i'm going to give you some examples and
i'm going to show you exactly how i make
up to 8 000
a month selling put options and at the
end of the video i'm going to place many
trades while explaining exactly how
and why i pick certain options along
with my profit from the trade
make sure to stick around to the very
end to become a master at collecting
weekly income with options
my one promise to you is that in this
video if you're able to focus and commit
i'm going to dramatically increase your
portfolio income
all at the same time you're going to
have a new perspective on entering
stocks and how options work
before i jump in i appreciate a quick
thumbs up and with that being said
let's jump into being aggressive about
our learning there are basically
two reasons to sell put option contracts
one to generate income
and two to acquire shares of a stock at
a discount to the current market price
the standard definition of a put option
contract is that a put gives the holder
or the buyer the right to sell 100
shares of stock at a specific share
price
by a set date basically there are two
ways of viewing short puts or in other
words the strategy of selling puts
one being paid to insure someone else's
stock and
two being paid for offering to buy
someone else's stock
i really like the insurance analogy
because the insurance industry is
profitable and selling puts is the
secret way that warren buffett
actually became rich with his geico
company warren buffett invested all the
geico money that he was pulling in
through premiums just like i'm about to
show you guys
in the example i'm going to give you
insurance translates well because
puts are basically insurance for the
share price of a stock if you own 100
shares
of xyz company and you purchase a put at
the strike price of 100 you can exercise
the contract
up to the expiration date and put the
shares to the put seller at 100
per share in other words you're insured
at the 100
share price level no matter how low the
stock trades you can exercise your
contract at any time you want and force
someone else
to buy your shares for 100 per share
even if the company goes bankrupt
you're guaranteed 100 but what i'm going
to explain to you
is being the person that sells the put
and consistently collects that premium
this form of insurance or put selling is
both lucrative
and safer than just being a stock
investor as we'll see but first
let's look at some key definitions
terminology and examples together
like a lot of specialized topics options
trading has its share of jargon but once
translated into english it's actually
very easy to understand
the first is strike price this is the
price at which you're insuring the
underlying stock
if the stock is trading at or above the
price at expiration the put will expire
worthless
if it closes at the expiration below the
strike price you will
automatically be assigned the shares
these are basic definitions
later we'll explore the incredibly
flexible nature of managing short
options
next we have expiration date as you
might expect this tells you the duration
of the trade
just as a traditional insurance company
is only valid for a specific amount of
time
so are options option contracts also
have ending dates
depending on the stock you can select
weekly expirations for options
or ones that don't expire for months or
even years
i'll explain later which ones are the
most profitable next we have
premium this is actually the fun part
because this is the amount that you get
paid
option prices are listed in what's
called an options chain which includes
the market maker's current bid
and the current ask price it's very
similar to stock quotes but since each
contract represents 100 shares of the
underlying stock to convert to a total
dollar amount you'll need to multiply
these prices by 100.
every time you see a price for an option
you just multiply by 100 for each
contract that you're trading
and if you sell a put option contract
for one dollar for example
that would actually be 100 upfront last
we have assignment when the owner of a
put exercises his or her contract
someone is on the other side of that
transaction being assigned the shares
this is one of the biggest fears of
those newer to the strategy
but it's often an overblown fear and
very easy to avoid
i'll explain more of that when we get
into the live trading session that i'm
going to do for you guys today
a common question is how can you sell
something that you do not have
selling something you don't own creates
a short position hence when you sell to
open a put
option you've established a short put
position in one way that's similar to
shorting a stock but where it can be
confusing
is that short sellers benefit when a
stock declines while put sellers benefit
the most when a stock doesn't decline
selling a put is also referred to as
writing a put and i find this to be a
more helpful way of viewing the trade
because it aligns more closely to the
insurance analogy
you're writing input in the same way
that your insurance company writes an
insurance policy which you then sign
and you buy keep in mind whatever gets
open must eventually be closed
so a sell to open put selling
transaction will eventually be closed in
one of three ways
the first way is the put expires
worthless if the stock closes at
or above the short put strike price at
expiration
two the put holder exercises the option
and
you're assigned the shares three you
submit a buy to close transaction
this last one is where the great
flexibility of foot selling starts to
come in
because you're always free to buy back
the put you previously sold
or wrote at any time there are many
reasons why you might want to buy to
close a short option position
cutting your losses on a trade exiting
early to lock in profits
or as part of a rolling adjustment
strategy i cover rolling options in more
detail in my coaching and options course
as a topic as it gets more complex
before we move into an example here's a
few more important points to make sure
we're on the same page
you sell options at the bid price to
collect income and
open a short put option you are selling
to open when you're ready to close you
buy to close
at the ask price there's also a big
difference between selling puts for
income
versus selling puts to strategically buy
a stock at a discount
as we've already discussed selling or
writing puts is often compared to being
your own miniature insurance company but
instead of insuring someone else's car
or house or bike or whatever it may be
in their life
you're ensuring their shares of price of
their stock if the stock in question
cooperates you can make some very good
short term returns
if you're primarily drawn to foot
selling because of the great short-term
income the strategy can produce
you're in the right place however even
when the stock falls you're not limited
to buying your put back for a loss when
you sell a put you need collateral equal
to 100 shares of the put you're selling
this is because at expiration if the
stock is below your put
price and you decide not to close your
position you will be assigned the shares
at the strike price the beauty of this
is if you don't mind buying the stock
at that price you're not in a really bad
position in fact
heads you win tails i'm fine with the
situation as well because you want that
stock to begin with
say you sold a put at 100 when apple was
a hundred and thirty dollars per share
at expiration let's just say that apple
went down to ninety eight dollars per
share
if you believe apple will make it back
to 130 or at least even 120 dollars in
the near future
you've just bought yourself a huge
discounted stock that you're excited to
own
had you just bought it as a regular
stockholder at the time and you didn't
sell a put you would have lost thirty
dollars
something you put on the other hand
you're 28 dollars better because you
only lost two dollars where the
stockholder lost 30
in actuality you might have lost even
less since you collected money for
selling the put to begin with
now i'm going to show you guys some live
trading of how i utilize this option
strategy
every single week to make thousands of
dollars let's see how much premium i can
collect while i walk you through my
exact thought process
now here's some key takeaways to magnify
your results further
anytime you're selling puts for income
rather than stock acquisition i think
you definitely need to incorporate at
least a basic level of technical
analysis
i've shown you some basic technical
analysis and i would recommend
you try to use another indicator as well
i personally find
value-oriented stocks a whole lot safer
to insure than growth or momentum stocks
however in the trades that i've made i
was looking for more outsize returns
with higher risk
the premium is higher for stocks with
more volatility
finally if you do choose to sell puts on
a growth or momentum stock it is wise to
keep your position size small
and grow it as you gain more confidence
alright guys so i'm going to be trading
about 175
000 today let's take a look at all the
different tickers that i have here
and let's pick a good stock to sell some
puts on so essentially what i'm going to
look for
is stocks that are kind of following a
lot today that i want to own
and when i'm looking through today's
stock list a lot of stocks are down so
today is a fantastic day to sell some
puts
all right so i'm taking a look at apple
and i'm kind of a fan of apple so i'm
gonna click
into apple and i'm also gonna go to
yahoo finance and i'm gonna pull up the
apple chart just so i can do some
technical analysis for you guys and show
you what i look for when i'm selling it
put
so here i am i'm in the charting feature
and i'm actually going to get rid of
this bolinger average i'm going to show
you guys what bollinger average means in
just a second
so the first thing that i want to do is
i want to take a moving average of apple
and see where it has been trading for
the past maybe 30 days
so for this period instead of 50 which
is the preset for yahoo finance i'm
going to put 30 instead
now i have a line here that shows me the
average price that apple has been
trading at for the last 30 days as you
can see
apple is trading below the 30-day moving
average now i'm going to go over and i'm
going to go into indicators and i'm
going to click
bollinger bands and bollinger bands are
just a simple way for me to understand
where apple is going to trade in terms
of its high point and its low point in
terms of its standard deviation
all that really means is where apple is
likely to be traded based on this
indicator
so after i use this indicator you can
see that apple is near its low of the
bollinger band
now i also look at rsi you can see here
that it's 46 which means to me that
apple is somewhere in the middle of its
trading range
it's neither oversold nor is it
overbought now i see apple had a lot of
consolidation around the 119 level so
one time it was at 119
another time it was at 120 again it was
around 119.99 so i see there's a lot of
support for apple right at the 120 level
now i'm going to go back to robinhood
and what i'm going to do here is i'm
going to click trade apple options
now apple is 128 dollars per share and
what i'm going to do here is i'm going
to go to sell
put because this is what the video is
about i'm going to show you guys exactly
why i sell puts and what level i do it
at so this week
is may 14th however i want to go out at
least one month so i can capture
a decent amount of premium and not have
to trade weekly with this single trade
however i'll show you more weekly
trading in the next stock that i pick
but for apple it's a little bit less
volatile meaning that you don't really
want to do weekly options because
they're not going to have
as much premium as a monthly option will
have so what i'm going to do here is i'm
actually going to go out one month and
go for june 18th
and now i'm going to take a look at the
option chain so this is what an option
chain is
it gives you the strike price that gives
you the break even it gives you the
chance of profit and it gives you so
much more information
now i did tell you guys that the 120
level has a lot of safety and a lot of
support around it so
for me this looks pretty good however if
you take a look at the premium
1.51 cents or as i've said earlier it's
going to be 151
because it is 100 shares actually this
is a decent return it's just slightly
over one percent but in a month i want
to make a little bit
over one percent so for me the 120 level
is just not risky enough
also if you take a look at the 122 and a
half strike
you can see here the break even is
actually 120 dollars and 41 cents
that's because when you take the strike
price and you subtract the premium that
you collect
your actual break even price would be
120
and 40 cents because of that premium
that you collect
for me this is much more safe trade
however it does have some decent premium
and i do want to have this in my
portfolio so this is a great example for
me to show you guys so what i'm going to
be doing right now is i'm actually going
to click this little plus sign right
here which tells robinhood that i want
to sell this put option
you guys can see now that it says short
put now all you really have to do is
click continue
and i'm going to enter the amount of
contracts that i want to trade for me i
want to enter three contracts because i
have a decent amount of money sitting
around
and i want to execute three contracts so
here i go i click three and i'm gonna
put the bid price which is two dollars
and eight cents
so two dollars and eight cents is the
bid price and two dollars and eleven
cents is going to be the ask price since
i'm selling this option i'm going to go
for the bid price
two dollars and 10 cents i'm going to
review this trade real fast
and robinhood is asking me are you sure
you want to buy 300 shares of apple at
122.50
notice they're saying that because when
you sell a put option you're committing
yourself to buy the stock
at the strike price so robinhood knows
this and they're asking me
are you willing to purchase a stock at
that price and
since i just showed you guys that on the
technical chart i would be happy to own
apple at an average price of about 120
i'm happy to place this trade this trade
takes up 36 000
of my capital so there you go guys i
just collected 636 dollars for the first
trade
all right now let's find the next stock
that i want to trade on so what i do
here is i'm going to go to yahoo finance
and i like to look at the trending
tickers because usually
when a ticker is trending then it
actually has a lot more premium to it
since more people are interested
and it has more volatility but what i
see today is that a lot of people are
interested in dogecoin and ethereum
but i do see alibaba on the list so i'm
going to click alibaba and see what's
going on so alibaba is selling off and
it's down 2.88
today what i'm going to do again is go
to the chart i'm going to do the very
same analysis that i did before
now what we can see with alibaba is for
some reason it's selling off
significantly
i'm not going to do a lot of fundamental
research in this video however
i'm going to do a lot of technical
research because that makes life a lot
easier and faster to trade stocks
and i'm also familiar with alibaba as a
company and i know they're very good
chinese stock
what i see right off the bat is alibaba
is trading way below its bollinger band
and it's actually at 34 rsi which means
that it's nearly oversold another thing
that i'm going to do is i'm actually
going to zoom out of the three-month
chart and go to the six-month chart
because i want to see how low it's been
and what i can tell here is that right
now it's at its all-time low for the
past six months
what this means it's a great time for me
to sell and at the money put which means
that i'm going to be selling a more
aggressive put in collecting a lot more
premium
going back into robinhood i'm going to
type in baba as a ticker symbol and i'm
going to pull up baba
now again i'm going to trade baba
options i'm going to go
sell put and this time i'm going to
trade a weekly option because i promised
you guys to show you a weekly option
this option is going to expire on this
friday now what i'm going to do is i'm
going to pick an option that is near the
money because i don't think alibaba can
follow that much more
here alibaba is trading at 218 dollars
what i'm going to do is i'm going to
eyeball and see which option contract i
think has a decent amount of premium
but isn't too aggressive so i could sell
and at the money put at the 217 level
and collect 453
which would be about 2 in just a few
days however
i don't want to take that much risk
because the 212.5 level still has a lot
of premium
in fact it still has over one percent
premium in less than a week so what i'm
going to do is i'm going to click this
and i'm going to continue and again i'm
going to pick one contract and i'm going
to put in the bid price of two dollars
and 56 cents
or 256 review this trade
and put it in and actually as i'm
putting in this trade you guys can
already see that i have to go in
and cancel this trade boom i'm going to
cancel it because
the bid price has fallen quite a bit and
this is a very volatile stock today
so instead of 256 i'm going to put 254
and
quickly review this trade and hope that
it goes through submit
and boom we got filled and i collected
another 254
the next stock that i want to trade is
square square is another favorite stock
that i have
on my list and i actually have weekly
options on it today is monday so i don't
have any weekly options on square
therefore i'm going to open it up and
show you guys exactly what i like to do
so square is 222
per share and today i'm going to look at
the bollinger averages
rsis and the moving average no surprise
i have the same indicators i use all the
time because i get so much information
from these indicators now again it looks
like square is near its bottom of the
range it's around 222 dollars
and the bottom of its bollinger band is
about 222
now square hatch traded as low as about
207 here
and again here at 201 and again we had a
crash here and it was about 202
so i can tell that square has a lot of
support around the 202
about 205 level now the moving average
is much closer to if i zoom in the
moving average looks like it's around
229 dollars per share
so what i'm going to do is i'm going to
go to robin hood and i'm going to sell a
put option on square
i'm going to look at the option chain
and see which one makes the most sense
so i said at the 205 dollars i'm very
comfortable selling a put option
however since the moving average was
closer to 229 i am comfortable going a
little closer to the money with this put
option
so instead of the 205 put option which
only has a dollar and 12 cents
i'm going to go higher and i'm going to
sell a put option
at the 217 and a half strike because i
do want to own square
and if it doesn't end up going this low
i'm very happy collecting 373 dollars
worth of premium
so again i'm going to click sell put
option i'm going to click continue
and i'm going to enter two contracts
because i really do like square a lot
and i wouldn't mind owning 200 shares of
it now i'm going to put in a price of
355
or 3.5 dollars per option contract now
i'm going to review my trade it's going
to be a 710 dollar premium that i'm
going to collect
and i'm putting 43 500 to play so this
does happen from time to time i'm not
getting filled so what i'm going to do
is i'm actually going to click
and replace my order instead so 710
dollars might be a little bit too much
that i'm asking for
so instead i'm going to put a lower
amount of 3.35
this time and only collect 670
that's what i get for being kind of slow
and submit
all right so we just collected 670
all right so the next stock i'm going to
be trading is peloton ticker symbol pton
and i know a lot of people are a fan of
this company so i'm going to show you
guys an example of selling a put option
now if i take a look at the pto and
chart it has been trending a lot lower
but i do see a lot of people did sell
off right here
and the stock ended up crashing down to
82 however now
it seems a lot of investors are jumping
back in and you can see that by looking
at these two green lines
what these green lines means is that a
lot of investors are coming back in and
they're putting in some buying pressure
on the stock so now the stock was at 82
but it's trending higher at 85 dollars
so what i want to do
quickly is get in at about 82
since that was the bottom of the stock
so it's going up very very fast so i'm
going to do this example
very quickly and since this is the
fourth example that you guys have
already seen
i'm going to rush through it so real
fast i know 82 is what i want the break
even here is 81
81.28 perfect i'm going to sell this put
click continue put one contract and i'm
happy to get about 205 for it
review and you know what actually 205 is
too low so let me cancel that real fast
i'm gonna go for somewhere around 214
i do think i will get filled at 214
because the ask is 237
in theory you can all honestly go
somewhere in between the bid and ask
price
so i should get filled for 214 dollars
right now once this trade goes through
and boom we got filled so another 214
dollars
on the books and the collateral that i
used was 8
350 i hope that was helpful stick around
because i got some very important keys
for you to make more money and some best
practices for you when you trade put
options
one screen that has helped me is to look
for quality companies with good
fundamentals
if you decide to trade gross stocks like
me valuation is very important
you want to pick stocks that are not at
their all-time highs or at the very
least not at their
price to sales ratio all-time highs as
at that point it would be better just to
buy some call options rather than
selling puts
i've got a whole playlist on options
trading that you can check out by
clicking the end card in just a few
seconds
and you can also check out the weekly
option income academy for a full options
trading education
if you like this video or have any
questions you can comment below or
message me on instagram and if you want
some personalized coaching i'd love to
help you out
i'm excited for your growth regardless
and i'll see you guys in a later
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no one never sees me sees me