Is selling deep in the money puts a good strategy?
At this delta, every point change of underlying asset price results in an equal, simultaneous option price change in the same direction. For this reason, deep in the money options are an excellent strategy for long-term investors, especially compared to at the money (ATM) and out of the money (OTM) options.
Occasionally a stock pays a big dividend and exercising a call option to capture the dividend may be worthwhile. Or, if you own an option that is deep in the money, you may not be able to sell it at fair value. If bids are too low, however, it may be preferable to exercise the option to buy or sell the stock.
➢ Selling an ITM put is a strategy which may be used in an attempt to acquire the stock at a discount. Be careful though – if the price goes up, you could miss out on the opportunity.
If an option is extremely profitable, it's deeper in-the-money (ITM), meaning it has more intrinsic value. As the option moves out-of-the-money (OTM), it has less intrinsic value. Options contracts that are out-of-the-money tend to have lower premiums.
By selling a cash-covered put, you can collect money (the premium) from the option buyer. The buyer pays this premium for the right to sell you shares of stock, any time before expiration, at the strike price. The premium you receive allows you to lower your overall purchase price if you get assigned the shares.
The advantage of selling deep in the money calls is the safety you get with increased downside protection (intrinsic value). The disadvantage is that there may not be much time premium and you give up all of your upside potential.
The strategy of selling deep in the money calls is used when: You want to sell your stock. By selling a deep in the money call against a stock that you already own, you will gain time premium, but you will no doubt forfeit your stock if the stock does not go down below the strike price.
It's automatic, for the most part.
If an option is ITM by as little as $0.01 at expiration, it will automatically be exercised for the buyer and assigned to a seller. However, there's something called a Do Not Exercise request that a long option holder can submit if they want to abandon an option.
If you don't exercise an out-of-the-money stock option before expiration, it has no value. If it's an in-the-money stock option, it's automatically exercised at expiration.
When there is a right to sell the underlying security at a price higher than its strike price, the right to sell has a value equal to at least the amount of the sale price less the current market price. Therefore, an ITM put option is one where the strike price is above the current market price.
Can you lose money selling puts?
An investor who sells put options in securities that they want to own anyway will increase their chances of being profitable. Note that the writer of a put option will lose money on the trade if the price of the underlying drops prior to expiration and if the option finished in the money.
In order to receive a desirable premium, a time frame to shoot for when selling the put is anywhere from 30-45 days from expiration. This will enable you to take advantage of accelerating time decay on the option's price as expiration approaches and hopefully provide enough premium to be worth your while.
A Bull Call Spread is made by purchasing one call option and concurrently selling another call option with a lower cost and a higher strike price, both of which have the same expiration date. Furthermore, this is considered the best option selling strategy.
Is selling put options for income profitable? Selling put options is a guaranteed way to earn weekly or monthly income, and yes, it can be very profitable, month after month. The key is to remember to sell put options on only high-quality equities or ETFs that you would want to own.
For a put seller, if the market price of the underlying stocks stays the same or increases, you make a profit off of the premium you charged the seller. If the market price decreases, you have the obligation to buy back the option from the seller at the strike price.
How to ROLL OVER PUT OPTIONS (for a Living) [How to ... - YouTube
When there is a right to sell the underlying security at a price higher than its strike price, the right to sell has a value equal to at least the amount of the sale price less the current market price. Therefore, an ITM put option is one where the strike price is above the current market price.
You would want to sell deep-in-the-money covered calls when you think the stock price will go down. The deeper the covered call (, the higher delta at which it is sold), the more premium you will receive from selling it.
In times of high volatility, Buying deep in-the-money (ITM) options is a good way of implementing directional option trading strategies.
How to ROLL OVER PUT OPTIONS (for a Living) [How to ... - YouTube
