Investors are always looking for ways to generate additional income from their investments, and one strategy they can consider is selling put options. This strategy involves selling a put option contract and collecting the premium, with the obligation to buy the underlying stock at a specified strike price if the stock falls below that price by the expiration date.
If the stock price does not fall below the strike price, the investor keeps the premium as profit.
I was first introduced to the wonderful world of options back in 2019, and have been trading ever since. In this article, I'm sharing 5 stocks I'm actually selling put options and collecting premium.
My aim is to keep unassigned, When constructing my options trades I look for a delta under -0.1. That might give less premium, but better sleep at night for sure. Subscribe to my trades newsletter here: Covered Calls with Reinis Fischer
Here are five stocks that investors can consider for selling put options and generating extra income:
Amazon (AMZN)
Amazon is one of the most well-known and successful companies in the world, and it has continued to grow and dominate the e-commerce space.
On May 3rd, 2023, you could sell a put on Amazon stock with a June 2nd expiry and strike price of $95 for about $1.05. That gets you $105 and makes about 1.1% return in less than 30 days. Or about 13.12% annualized. Break-even: $93.95
If AMZN stock closes above $95 on June 2nd you keep the premium and start over. If the stock closes under $95 you risk getting assigned 100 shares, but check your break-even points. There are several options you could use not to get assigned, like a roll down or roll forward. Or you could take the assignment and turn it into a covered call.
Remember, you are selling one contract, 100 shares of AMZN stock, make sure you have $9,500 cash or in buying power (margin) to buy 100 shares if assigned.
Tesla (TSLA)
Tesla is a company that has experienced explosive growth in recent years, and its stock price has skyrocketed as a result. While the stock is volatile, selling put options on Tesla can generate a lot of income.
On May 3rd, 2023, you could sell a put on Tesla stock with a June 2nd expiry and strike price of $130 for about $1.31. That gets you $131 and makes about 1% return in less than 30 days. Or about 12% annualized. Break-even: $128.69
If TSLA stock closes above $130 on June 2nd you keep the premium and start over. If the stock closes under $130 you risk getting assigned 100 shares, but check your break-even points. There are several options you could use not to get assigned, like a roll down or roll forward. Or you could take the assignment and turn it into a covered call.
Remember, you are selling one contract, 100 shares of TSLA stock, make sure you have $13,000 cash or in buying power (margin) to buy 100 shares if assigned.
Bank of America (BAC)
Bank of America is a large financial institution that has continued to grow and succeed despite market volatility. Selling put options on Bank of America can generate consistent income.
On May 3rd, 2023, you could sell 2 put options on Bank of America stock with a June 2nd expiry and strike price of $24 for about $0.18. That gets you $36 and makes about 0.75% return in less than 30 days. Or about 9% annualized. Break-even: $23.82
If BAC stock closes above $24 on June 2nd you keep the premium and start over. If the stock closes under $24 you risk getting assigned 200 shares, but check your break-even points. There are several options you could use not to get assigned, like a roll down or roll forward. Or you could take the assignment and turn it into a covered call.
Remember, you are selling two contracts, 200 shares of BAC stock, make sure you have $4,800 cash or in buying power (margin) to buy 200 shares if assigned.
Wells Fargo (WFC)
Wells Fargo is another large financial institution that has a strong track record of growth and success. Selling put options on Wells Fargo can generate consistent income.
On May 3rd, 2023, you could sell a put on WFC stock with a June 2nd expiry and strike price of $35 for about $0.4. That gets you $40 and makes about 1.14% return in less than 30 days. Or about 13.68% annualized. Break-even: $34.6
If WFC stock closes above $35 on June 2nd you keep the premium and start over. If the stock closes under $35 you risk getting assigned 100 shares, but check your break-even points. There are several options you could use not to get assigned, like a roll down or roll forward. Or you could take the assignment and turn it into a covered call.
Remember, you are selling one contract, 100 shares of WFC stock, make sure you have $3,500 cash or in buying power (margin) to buy 100 shares if assigned.
Intel (INTC)
On May 3rd, 2023, you could sell a put on INTC stock with a June 2nd expiry and strike price of $26 for about $0.17. That gets you $17 and makes about 0.65% return in less than 30 days. Or about 7.8% annualized. Break-even: $25.83
If INTC stock closes above $25 on June 2nd you keep the premium and start over. If the stock closes under $25 you risk getting assigned 100 shares, but check your break-even points. There are several options you could use not to get assigned, like a roll down or roll forward. Or you could take the assignment and turn it into a covered call.
Remember, you are selling one contract, 100 shares of INTC stock, make sure you have $2,600 cash or in buying power (margin) to buy 100 shares if assigned.
Selling put options on these five stocks will generate about $329 in income against $33,400 in possible stock purchases. About 0.98% return in less than 30 days. Almost 12% per year.
In conclusion, selling put options on these five stocks can generate consistent income and help investors increase their returns. However, it's important to note that this strategy involves risk, and investors should carefully consider their risk tolerance and investment goals before implementing it.
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