How to Sell Cash Secured Puts; Safe Options Trading

Are you ready to take the next step and start using options to safely boost your portfolio and returns?  Learn to sell cash secured puts to bring extra cash into your account and reduce your costs for the stocks you want to buy.  I’ll show you how to manage your portfolio with LESS risk than buying stock outright at current market prices. 

(Watch the promo video to see how your first trade can pay for the course with change left over!)

First, we’ll review basic options concepts and terminology.  The review covers the content in my Options Trading for Beginners course, but I have highlighted the most important parts relevant to selling puts.  If you have already taken the  Options Trading for Beginners course, this will be familiar to you, but it’s probably worth listening to again.

Next, I’ll show you how to read an options chain and select a strike price and expiration date that match your investing goals.  You’ll get step by step instructions for selling your first put.  I’ll show you what to expect from the time the contract is opened until it expires.  And I’ll make sure you understand the importance of holding cash in your account as collateral in case you are assigned to buy the stock! 

We’ll look at scenarios where a put is “in the money” or “out of the money” at expiration.  I’ll show you how to find your breakeven point, determine your goals for the trade and see if the outcome you get matches your original goals. 

Note: This course is the second of a 3-part “Novice Options Traders” series, but it can be take as a stand-alone course. 

A warning about risk:  All over the internet, you’ll find self-proclaimed gurus who promise you outsized returns. Some of them may even try to convince you to hand your funds over to them so they can invest for you. Taking the wrong advice or giving your funds to someone else to invest can blow your whole portfolio. Even a few trades that go against you can wipe out any gains you make. 

You can count on me to level with you.  I will not make false promises and I will never suggest you give me your money to manage. I am a teacher, not a financial manager. Trading options is not necessarily any riskier than just buying stocks and funds. In fact, there are ways to use options to boost your returns and actually reduce your risk rather than amplify it.

I do want to be clear and honest up front that I am not encouraging the kind of risks that might bring you outsized gains on your overall portfolio. Anyone who promises you that is probably encouraging you to take on more risk than I can justify. But you can use options to pay less for stock you want to own, and to make extra cash on stocks you are willing to sell.  An extra few percentage points on your earnings each year, can really add up over time.  And during a bear market, or even just an expected market correction, using options can reduce your losses and set you up for a bigger recovery. 

Your first assignment will be to use this checklist to see if you are ready to trade options.

Are you ready to trade options?

Check and see if these statements are true for you.

• I have a brokerage account I manage myself.

• I know how to buy and sell shares of stock.

• I know how to choose stocks I want to own.

• I can use limit orders to set my buy and sell prices.

• I have the funds and the risk tolerance to invest at least $5000 in a single company.

• I want to actively manage my account.

• I have the time to check my options positions at least once a week and place orders once or twice a month.

• I am patient and want to build my portfolio safely, over time.

• I like to understand how things work. Don’t just give me a fish; I want to learn to fish.

(If these statements are not true of you yet, I suggest you start with my Novice Investors: Introduction to The Stock Market course to build more background knowledge.  Learn how the stock market works and spend a little time buying/selling stocks and funds before you jump into options.)