How to sell options for a living
I see options as a great way to boost my stock ownership and dividend income. I DRIP invest most of my monthly dividends. I hold my options income until it reaches a few thousand dollars. Then I buy more stock or I use the cash as leverage to sell another option. The plan is to reach financial independence sooner. Dividend stock investing, DRIP reinvestment, and selling options is a trifecta for my portfolio. At least I hope it will be ;-. This month I spent time improving my options tracking spreadsheet.
I added many new columns, including contract length, stock price DOC day of contract , current stock price, break even price, and annualized rate of return. The red and green dollar amounts shown in the current stock price column, adjust color automatically to show if an option is in my favor or not.
This spreadsheet is a work in progress. This new version is better than my last one. If you think there are metrics I should add or if you see any mistakes on this tracker, please let me know. Many of the stocks in my portfolio are already in options contracts. I did sell a 3-day Target put, 2 days before earnings. I choose instead to close and carry.
But I have 5 months to close this new contract or carry over to a better positioned contract. I only sell covered options. This means I either need to own each underlying stock or have cash reserves to cover each options contract.
Had I held all of my stocks, my options income this month would have been zero dollars. Most of this money is in Roth and traditional IRAs, which means these transactions are tax-free or tax deferred. I could miss out on further stock appreciation and some dividends next quarter.
But, I still believe markets are heading down in coming months. Because of this, I feel really good about holding cash back and making extra money selling options. Pinterest users are savvy and enjoy visuals. Ciao IH, We are having a similar run of experiences, though I see that you are much further into option trading!
First of all compliments for the results, one point that I always try to remember is that the gains are not locked until options are closed. I am also trading long shot options and that means that I need to set aside the cash until expiation. In any case very good work there! How do you choose the target strike on your option trading?
Yes, showing monthly income is a snapshot in time. This of course never happens. To find my strike price, I first find the stock with enough price movement to make options interesting or worth it to me. Then I choose a few strike prices, in or near the money. Then I run those strikes through my spreadsheet to determine annual ROR. Then I look at a few different time periods. Maybe the ROR is better on a longer contract.
I end up choosing the time period and strike price with the best ROR. Then I go for it. I only sell puts and calls. Maybe the next 30 trading weeks of SPX will see 25 consecutive weekly gains and selling put credit spreads would be the way to go. The anonymous Japanese daytrader, CIS, is one such example. Knowing that there are two certainties in the market, it makes seling options an attractive choice.
Now, all of a sudden, selling options for a living just became a whole lot more realistic. When you have more buying power, you can generate better returns and take less risk. The power that retail traders have is a smaller scale and liquidity. Let that sink in. This is the key to trading. More capital up to a certain point before reaching the billions equates to better odds of returns for the retail trader.
Know all of the options trading strategies , keep your risk under control, and diversify your underlying positions. Yes, showing monthly income is a snapshot in time. This of course never happens. To find my strike price, I first find the stock with enough price movement to make options interesting or worth it to me. Then I choose a few strike prices, in or near the money.
Then I run those strikes through my spreadsheet to determine annual ROR. Then I look at a few different time periods. Maybe the ROR is better on a longer contract.
I end up choosing the time period and strike price with the best ROR. Then I go for it. I only sell puts and calls. I find Interactive Brokers very convoluted and confusing to use. I review and plan my trades on ToS and then make my trades on optionshouse. Much easier to use. The UI is very clunky, built for day traders I guess. I do love the fees though. My plan is to keep 1 Schwab account for research and monitoring, then do my trades on Interactive Brokers.
But did you guys ever hear of dough? Yes, they do not capitalize anything. Thanks for sharing Scott. It only works with TD. If you buy stocks you pay the standard TD commission. It is a really cool deal. How about adding the Dividend Ex Date and Earnings Date to your spreadsheet if it falls within the option period?
I agree that these are both important to track. I agree Pinterest is tough. I think I need to create boards for all of the big topics, recipes, clothing, travel, etc. Then start sharing a bunch of those pins. Then people will reciprocate. Congrats on the options income! I do have one question about the taxes — are you taxed on the total income e. I bet you love this answer. If the option expires worthlessly, record the premium you received as profit. If the buyer exercises a call option against you, you must sell stock to the buyer at the strike price.
Add the call premium to your sale proceeds — your profit or loss depends on the price you paid for the shares you sell to the buyer. If a buyer exercises a put option against you, subtract the premium you received from the cost basis of the stock you are obligated to purchase. Your profit or loss will depend on the price at which you eventually sell the shares put to you. If you offset your option — closing your short option position by buying an identical option — subtract the premium you paid for buying the offsetting option from the premium you received from writing the original option — the result is your net profit or loss.
This is why I have an accountant as one of my best friends. Great job on the options. I have sold quite a few covered calls too.