I took the leap of faith and quit my job a year ago to become a full time options seller, and it was the best decision I ever made
here are some of the most important lessons ive learned along the way:
1. sell covered calls on green days
when a stock rallies, the options premium increases. If you’re happy to sell the stock a lot higher anyway, then you may as well get paid while you wait
2. sell cash secured puts on red days
it’s very important that you only sell CSPs on stocks you actually want to own. if you wouldn’t be happy about owning the stock at the strike, you probably shouldn’t be selling the put.
3. sell when IV is high
high beta names offer higher IV, which offers higher premiums. ideally, you want to sell volatility when it’s expensive.
4. 0.15-0.25 delta is the sweet spot
i’ve found that this range offers the best R/R for balancing the collected premium against the probability of expiring OTM and getting assigned
5. don’t chase premium
the juiciest premium usually comes with a reason. always understand the risk you’re being paid to take
6. take profits early when it makes sense
if you’ve captured 70-90% of the premium, ask yourself whether the remaining premium is worth keeping the position open
7. you don’t have to trade every day
some of my best decisions have been doing nothing and waiting for a better setup.
8. avoid earnings unless intentional
earnings can massively increase IV and the underlying. the premium is high because the expected move is high.
9. consistency beats home runs
the goal isn’t to make the maximum premium on every trade, it’s to build a process you can repeat through different market conditions.
10. always have an exit plan
know when you’ll take profit, roll, close for a loss or accept assignment before entering the trade.
11. target between 2-3% a month
this is subjective and personal to you, but for me this is the amount I need to earn what I was previously earning at my job, so I can continue to pay the bills whilst having freedom
12. once you get more experienced, understand using margin to sell puts
i’ve only recently started using this strategy, and i will never use more than 20-30% of margin to heavily reduce risk, but this is a great way to increase your income without having to tie up your own capital
i’m still trying to work on a few of these myself, mainly trying not to chase premium and I sometimes don’t take profits early and the trade goes against me, but it’s something I’m working on everyday!
what are some lessons you’ve learned from selling options?