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7 Tips for Mastering Put Selling

An attractive strategy for both options and stock traders

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Tip #4 – Only Trade Out-of-the-Money Puts

profit loss

We prefer to trade only out-of-the-money puts. Why?

The risk of assignment is much lower, they require smaller initial margins, and their premiums deteriorate at an accelerating rate as the options approach expiration. Remember that time decay is your ally when selling premium.

Also, out-of-the-money put sellers can fully benefit from a flat or slightly lower move in the stock. Selling an in-the-money put requires the stock price to increase to move the put out of the money.

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