Writing options for a living
5 stars based on
Another month down and another month making money selling options. I was very successful selling options inbut in the first half ofnot so much. In June ,I decided to spend a little more time investigating trades before pulling the trigger. This has made a difference.
Easy things like validating if an earnings call or dividends would be paid within an option contract period. Neither action would necessarily stop me from trading, but accounting for them and their potential risk is important. Last month I selling put options for a living a bunch of stock.
I was in the process of moving some of my money from 2 brokers over to Interactive Brokers. I sold because markets are really hot and most stocks are overvalued. I wanted to lock in gains and use the money to sell more options.
My retirement goal is to spend selling put options for a living golden years living on dividends alone. This means I need to have millions of dollars in stock. I see options as a great way to boost my stock ownership and dividend income.
I DRIP invest most of my monthly dividends. I hold my options income until it reaches a few thousand dollars. Then I buy more stock or I use the cash as leverage to sell another option. The plan is to reach financial independence sooner. Dividend stock investing, DRIP reinvestment, and selling options is a trifecta for my portfolio.
At least I hope it will be. This month I spent time improving my options tracking spreadsheet. I added many new columns, including contract length, stock price DOC day of contractcurrent stock price, break even price, and annualized rate of return.
The red and green dollar amounts shown in the current stock price column, adjust color automatically to show if an option is in my favor or not. This spreadsheet is a work in progress. This new version is better than my last one. If you think there are metrics I should add or if you see any mistakes on this tracker, please let me know.
Many of the stocks in my portfolio are already in options contracts. I did sell a 3-day Target put, 2 days before earnings. I choose instead to close and carry.
But I have 5 months to close this new contract or carry over to a better positioned contract. I only sell covered options. This means I either need to own each underlying stock or have cash reserves to cover each options contract. Had I held all of my stocks, my options income this month would have been zero dollars. Most of this money is in Roth and traditional IRAs, which means these transactions are tax-free or tax deferred. I could miss out on further stock appreciation and some dividends next quarter.
But, I still believe markets are heading down in coming months. Because of this, I feel really good about holding cash selling put options for a living and making extra money selling options. Pinterest users are savvy and enjoy visuals. Ciao IH, We are having a similar run of experiences, though I see that you are much further into option trading! Selling put options for a living of all compliments for the results, one point that I always try to remember is that the gains are not locked until options are closed.
I am also trading long shot options and that means that I need to set aside the cash until expiation. In any case very good work there! How do you choose the target strike on your option trading? Yes, showing monthly income is a snapshot in time. This of course never happens. To find my strike price, I first find the stock with enough price movement to make options interesting or worth it to me. Then I choose a few strike prices, in or near the money. Then I run those strikes through my spreadsheet to determine annual ROR.
Then I look at a few different time periods. Maybe the ROR is better on a longer contract. I end up choosing the time period and strike price with the best ROR. Then I go for it. I only sell puts and calls. I find Interactive Brokers very convoluted and confusing to selling put options for a living. I review and plan my trades on ToS and then make my trades on optionshouse. Much easier to use. The UI is very clunky, built for day traders I guess.
I do love the fees though. My plan is to keep 1 Schwab account for research and monitoring, then do my trades on Interactive Brokers. But did you guys ever hear of dough? Yes, they do not capitalize anything. Thanks for sharing Scott. It only works with TD. If you selling put options for a living stocks you pay the standard TD commission. It is a really cool deal. How about adding the Dividend Ex Date and Earnings Date to your spreadsheet if it falls within the option period?
I agree that these are both important to track. I agree Pinterest is tough. I think I need to create boards for all selling put options for a living the big topics, recipes, clothing, travel, etc. Then start sharing a bunch of those pins. Then people will reciprocate. Congrats selling put options for a living the options income!
I do have one question about the taxes — are you taxed on the total income selling put options for a living. I bet you love this answer. If the option expires worthlessly, record the premium you received as profit. If the buyer exercises a call option against you, you must sell stock to the buyer at the strike price.
Add the call premium to your sale proceeds — your profit or loss depends on the price you paid for the shares you sell to the buyer. If a buyer exercises a put option against you, subtract the premium you received from the cost basis of the stock you are obligated to purchase.
Your profit or loss will depend on the price at which you eventually sell the shares put to you. If you offset your option — closing your short option position by buying an identical option — subtract the premium you paid for buying the offsetting option from the premium you received from writing the original option — the result is your net profit or loss.
This is why I have an accountant as one of my selling put options for a living friends. Great job on the options. I have sold quite a few covered calls too. Selling puts on a stock you want to buy anyway is a great way to get a discount too. Thanks for the comment NNL. I sell both calls and puts.
I seem to have better luck timing the market with puts though. I looked back at and found that I was more successful with short puts than long ones.
I sold closer to the money at higher premiums and my success rate was pretty high. To your point, I run the risk of buying more stock, but I can always flip it or sell calls if my put contracts get assigned. The short nature of these trades reduces my odds of big drops or downward trends, but these are always possible.
I like your strategy. Best of luck to you Evan. Many bloggers I follow are in different situations. Most of those bloggers are too selling put options for a living to test the options waters though. Oh darn, SF has really become a high cost of living area.
Good luck getting your income up to the required levels. That will be quite the challenge looking at the numbers…. The wife wants Thailand though. For now, happy to cheer you on from the sidelines.