The best investment strategy will never be a get-rich-quick scheme.
David Jaffee of BestStockStrategy.com has taught more than 1,500 students how to be patient and disciplined by structuring their investments and trades to have a high probability of profit.
With the right investment strategy, you can get paid to buy a stock at a reduced price while also getting paid for your time.
Keep reading to learn why David Jaffee teaches his students how to sell put options, increasing their potential for profit while managing losing trades.
Why should you sell put options?
David Jaffee offers a comprehensive online options trading course through BestStockStrategy.com where he teaches students to sell put options on large cap, market-leading stocks.
Put options should be sold at a strike price that is about 10% to 20% below the current market price.
When you sell a put option, you collect the option premium regardless of whether the option expires in-the-money or out-of-the-money.
By selling a put option, you agree to purchase a specific stock at the strike price before or at the expiration date.
Choosing a strike price that is 10% to 20% lower than the current market value enables you to potentially earn a profit while purchasing a stock at a lower price.
This is similar to how insurance companies make money. They sell insurance. In this case, we are selling insurance by agreeing to buy a stock at a lower price.
The best investment strategy is one that reduces risk and by learning a strategy taught by one of the best options trading coach is a great way to start trading options and improve your current returns.
Example: Sell a Put Option
When Tesla was trading at $900 and Amazon was trading at about $3,500, many investors thought those stock prices were too expensive.
Investors did not want to buy those stocks at their current market value.
Instead, there is a way to agree to buy those positions at a significantly reduced price while also collecting money and waiting for the price to decrease.
That is what happens when you sell option premium.
In this example, you could have sold a put option for Tesla with a strike price of $600 and collected a few hundred dollars of premium.
You could have also agreed to buy Amazon at $3,000 by selling a put option with a strike price of $3,000 and collected about $600 in premium.
If the stock hits the strike price on or before the expiration date, you can purchase the stock at a significantly lower price than where it was trading at previously.
You also keep the option premium you collected regardless of the outcome of your option trade.
Because of the high rate of success, David Jaffee teaches all of his students how to sell option premium through online courses, options trading seminars, YouTube videos, blogs, and more.
Manage Risk When Selling Put Options
One issue with this strategy is that some people become overconfident because their win rate is very high.
In these cases, traders may end up selling too many contracts and running out of buying power.
When the market corrects or pulls back by 10% or 20%, the trader is forced to close out these positions for large losses.
However, if you are able to protect yourself against a large volatility expansion event or a large market downturn, you can earn around 30%, 45%, or even 50% every year by selling put options.
In a worst-case scenario, you can run a wheel strategy.
With a wheel strategy, you sell very far out of the money put options, take assignment of the position, and sell covered calls against it.
From there, you simply wait for that position to get called away from you.
Example: Selling Put Options with the Wheel Strategy
The wheel strategy is a viable and legitimate way to earn alpha returns that exceed the S&P 500 index.
For example, if Amazon is trading at about $3,100, you can sell a $2,800 put option with an expiration of two to three weeks out.
If the market corrects, you can take assignment of Amazon at $2,800 then sell short-dated calls against that with a strike price of about $2,900 (or $100 more than the current market price).
If the position gets called away from you, you will realize the capital appreciation of the increase in the underlying stock price as well as the benefits of collecting the premium by selling the call option.
Learn the Best Investment Strategy with David Jaffee
After years of learning, practice, and trial and error, David Jaffee considers selling put options to be the best investment strategy.
Even if you consider margin to be too risky and don’t want to use it, you can still utilize the wheel strategy.
The secret to success when it comes to options trading is learning to be disciplined and patient, which are traits David Jaffee teaches to his students.
David Jaffee has taught more than 1,500 students how to win ~95%+ of their trades by selling option premium.
Learn how to maximize profits while managing risk by enrolling in David Jaffee’s online options trading course today, or taking his 7 day trial, it’s only $19, at https://beststockstrategy.com/memberships