Selling vertical puts can be a great strategy that will pay out anywhere between 10-40% returns on your risk. Here are a few examples. $TSLA Vertical Put -700P/+690P We will sell $700 put and buy $690 put, this is a spread of $10 dollars which is your max risk minus the credit you receive which in this example will pretend will be $2, which gives us around 20% returns. Our goal is to keep $TSLA above $700 dollars if it goes below we can take a loss of up to $8 dollars per contract.
$SPY Vertical Put -285/+284P on 3/6 (Actual Trade From Today)
Here is another example of a trade we took today, sold $SPY 285 and bought $284. I took 100 contracts for a risk of $8700 to gain $1300 dollars around a 15% return, and it expires the same day. The chance of $SPY closing more than 5% was going to be near impossible so we took the risk and took this trade. We added to this trade and took another 100 contracts at -$287/+287 for 115 contracts which netted another $2500+ profit!
Why do this on a Friday morning? It's easier to predict what the closing price on a single day is than trying to estimate what the price will be a few days out where a stock can gap up or down. The biggest issue in this strategy is a gap. Thus the reason why I tend to sell the largest positions on a Friday morning (usually 1-2 hours after open). You can adjust the position and/or close the position as well for a much smaller loss as well if you need to while the market is open compared to taking a max loss.
I do not close the positions if I'm in profit at the end of the day (we let them expire worthless, both legs) unless the TSLA, in this case, is at $701 - since options can be exercised up to 1 hour after close this can go in the money, so I would rather close it and not take a risk, I will still be in profit but not 100%.
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