Why selling options?

You can use the very same strategy as that employed by the profitable industries of insurance companies and casinos to make 40%, 50% return or even more, on a consistent annual basis. Very few investors know the concept of selling options and apply it the right way. If done correctly, the market conditions, the political environment or the time of the year don’t matter.

Being trapped by a purchased asset

Have you ever been trapped by an asset you purchased (stock, futures, options), hoping and praying that it appreciates in value? Reality is that the majority of non-professional traders and investors lose money year after year, trying to pick the perfect bottom to buy a stock or a call option and the perfect top to buy a put option.

It is fact in the industry’s statistics that about 80% of all options held through expiration expire worhtless. Moreover, only about 10% or less of all options are exercised. This being the case, why aren’t more investors taking advantage of this impressive statistic?

Why are not all of these traders and investors selling options? The answer is, either they don’t care, they don’t know about it, they are scared of doing it or they are just ignorant about it.

Selling options is what professional traders and investors do

Have you ever wonder who made money on all those options that expired worthless (besides your broker)? Well, somebody took that premium you paid and put it in his or her account. A few traders and investors are not treating trading as a game of chance, but approach it from a different perspective than most people do.

Unlike the investing public, who buy assets or options on those assets, professionals have moved beyond the game of trying to guess which way the market is going to move. Professionals are more interested in playing the odds and what they do is selling options.

Trading with the odds in your favor

After selling options, the market can move in your favor, it can remain stationary, it can even move moderately against your position. In all these three scenarios, your options expire worhtless and you make money.

Selling Options Strategies - Options Trade MentoringSelling a Put Credit Spread and its P&L graph

There is also a possible way to lose money, if the market moves strongly against me, but there are also effective ways to deffend my position in this case, by adjusting the trade. I definitely like the odds of these trades and the trading results that we can achieve.

You can learn such strategies like Put Credit Spreads, Call Credit Spreads, Cash Secured Puts or Iron Butterflies, just to name a few of them. You can choose to trade monthly or weekly options. A more dedicated option trader can go for an advanced strategy, with a higher potential return, like 50%+ a year. Another one can choose a more relaxed, basic strategy, not requiring him to watch the markets too often, but still able to return a hefty 25% a year.

Truth is that options are the most versatile financial instrument that one can trade to grow his or her portfolio.