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7 Tips for Mastering Put Selling

An attractive strategy for both options and stock traders

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Tip #5 – Use Short-Term Options

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When selling puts, focus on short-term options, particularly those with less than two months until expiration.

Because the option-pricing model assumes that price movement is random, the premium per unit of time increases as the length of time to expiration decreases. Thus, the put seller gets more “bang for the buck” with short-term options. Also, the rate of time decay increases as the time to expiration decreases.

Time decay works in favor of option sellers, and the accelerated time decay of short-term puts is optimal.

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