Options Income Blue Print
CHEAT SHEET
Selling Weekly Put Options
Generating an Extra Pay Day Every Week
Advantages of Selling Weekly Put Options:
You will turn or use capital more frequently
Shorter-term positions, and more of them
Less capital required for each trade
Stocks To Sell Weekly Puts:
If you have a positive short-term view on a stock (Slightly Bullish to Bullish) . . .
SELL PUTS.
When to Sell Weekly Puts:
I like Wednesday morning as the best time to sell weeklys for 2 days.
Selecting the Weekly Put:
Time Decay: Weekly options are only open 8 days and time decay is ferocious
the closer to expiration. The closer you sell the put to expiration, the less chance
for the position to go against you.
Rich Premiums: Look for stocks with high volatility and rich premiums.
Implied Volatility: For weeklys, 25 is the magic numberlooking for Implied
Volatility between 25 and 40 (above 55 it gets hairy).
Sell Put Strikes: Sell puts one or two prices out-of-the-money
Liquidity: At least 100 open contracts at the strike price and narrow bid/ask
spreads of $.01 to $.05 (at most $.10)
Entering and Exiting the Put Trade:
Enter Sell and Buy-Back Orders at Same Time: Most times, we expect weekly
put options weve sold to expire worthless. If you dont want to wait for the option
contract to expire, you can enter your buy back trade when you enter the Sell
position with your target price.
Closing a Position: Although the goal is allow our weekly options to expire
worthless (good for the seller), dont equate buying back your puts with not
having a successful position. You just put cash in your account by doing so.
Anatomy of a Weekly Put Options Trade:
Trade Date: October 22, 2013
Stock: Gilead Sciences (GILD)
Support for the Trade: Gilead Sciences (GILD), the world leader in HIV
treatments and arguably the finest pharmaceutical firm on the planet, was in a
general uptrend in October.
Step-by-Step Trade Recommendation: Sell the Gilead Sciences (GILD)
October, Week Four 65 puts for $1.00 (one dollar) or $100 per contract.
1.
2.
3.
4.
Sell (not Buy)
GILD (stock ticker)
October, Week Four (Week in which the option contract expires)
65 Strike price of the stock (underlying stock) supporting the option. (Gilead
was trading around $66.60 at the time)
5. Puts (we are selling puts)
6. $1.00 (one dollar)price of each share in the contract
7. $100 per contract = $1.00 x 100 (100 shares are in 1 contract) = $100.00
per contract.
Result: In less than 4 days, the price of Gilead Sciences moved above $67 and
on Friday, October 25th the GILD October, Week Four 65 puts expired worthless.
Cash in Hand: The seller of this trade kept $100 for every contract of GILD
October, Week Four 65 puts sold.
Trade Return: 1.5%
Annualized Return: 76.9%
