The best way to generate income in an uncertain market where those supposedly safe high yield stocks could take a hit (and therefore your capital will take a hit) is to sell puts. You can sell option puts monthly, weekly or quarterly, depending on your schedule and income needs.
The advantage of selling puts over buying calls is evident in the math! Recent studies show that 80% of long options expire worthless while option sellers reap all of the benefit (and cash) of those losing trades.
By becoming a put-seller, you have hundreds of stocks and ETFs to choose from that include plenty of premium and a enough liquidity to generate extra cash in your bank every month.
With this strategy in mind, here are 5 stocks and ETFs I like that you can sell puts against as a smart way to boost your income in a volatile stock market.
Apple (NASDAQ:AAPL): This is the best company in the world and the most undervalued big cap in the world, selling at 16.5 times earnings and a deep discount to other growth companies in the S&P. It also has the most liquid options. I sell puts on AAPL all the time, and one of my favorite trades to generate a quick couple of hundred bucks is by selling an out of the money put on Friday round two o’clock – a weekly put that will expire in two hours. Your capital is only committed for 2 hours and the cash is in your account on Monday. My target price for the AAPL is $1240.
Corning (NASDAQ:GLW) is a grossly undervalued stock in the Apple ecosystem — they make the GorillaGlass used in phones and tablets — this is a low cost stock with reasonable volatility and therefore excellent premiums on the puts you sell. Weekly puts are not yet available, only monthlies. I trade the stock and the sell the puts now and again, the stock is worth $22 (it is currently $11 and change) in a couple of years.
iShares Silver Trust
The IShares Silver Trust (NYSE:SLV) has big time volatility and big time premiums for puts, both monthly and weekly options. Silver is coming off a big sell off and even though $30 seems to be a hard ceiling, the liquidity to be created by the Fed and the European Central Bank will continue to drive trades to previous metals.
Speaking of precious metals, Tiffany (NYSE:TIF) TIF is a stock that has extreme volatility for a well-known brand and if you are an active trader, it is a dream to sell puts against. There is short-term support during sell offs and long-term support is there around $55. This is a great name to trade for income.
Potash (NYSE:POT) is a fertilizer outfit in the middle of the global boom in demand for agricultural commodities – and you can sell long term puts and generate returns north of 10% and only have to check your trading screen once a week. A well managed company with liquid options, reasonable premiums and with just enough volatility to produce monthly income.