5 Tips to Master Put Selling

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Friday, January 29, 2020/ 04:40PM / Sponsored Post / Header Image Credit: Uptick



You don't have to predict the future, but you do have to time it perfectly regarding stock options. The timeframe you get from trading options makes accuracy less important than timing. When placing put orders, it's important that you have a tested system. Tweaking your strategy can be done by learning proven tips. Put selling is a sound strategy in bear markets, but it's used in both short and long terms.


How to Sell Put Premiums

Selling put options is possible through a broker-first and foremost. Short orders require that you're first fronted an asset via borrowed money. Essentially, if you sell, sure, someone is buying, but you have to be the owner of it first. Otherwise, you have nothing to give. Placing a put order is best done after you've done some research. Every investor must identify the market conditions in front of them. Place in your put premium when you're sure that prices, overall, are headed downward.


Here are some tips you then want to think of:


1Knowing where to Get in and Out

Don't wait for your positions to unravel before knowing when to exit them. The place you enter, which is a price, should be noted alongside a price to exit. Your entry or exit strategy doesn't have to be complicated. Just ensure that you have one in place, so that your decisions which follow are established.


2. Incorporating Reliable Indicators

Consider what it's like to see one thing but to get multiple perspectives of it. Indicators give you additional dimensions to the common data you use. Indicators that work well for put orders are the RSI, Boiler bands and the put-call ratio. The relative strength index (RSI) shows how prices have changed from the past. Boiler bands show how far prices drifted from their ranges. The put-call ratio shows how many buyers there are against sellers.


3. Investing, Only in What You See

Until your hunches are supported by facts, don't feed into them. There are hundreds of positions to take each day, but you can't force them to appear. Be sure to, instead, use patience. Wait to see complete trends form before making assumptions.


4. Timing Your Trades via Theta

According to Tasty Trade, "One of the most important aspects of selling premium is the positive theta value that results." Finding the rate of decrease that an asset falls at is done through "theta." This idea is more theoretical than equational. There is no specific math equation, for even intrinsic value is equated as a result of theta. Here, the theta law states that over time, all positions are worth less. Right before options expire, they are worth less than when initially started.


5. Recording Your Trading History

It takes a bit of study to truly see why your put options haven't worked. Keep a journal with you as you practice for this reason. You can always start with recording your personal success, but your aim should be to study your faults.


Be critical of your mistakes. It takes very little to correct yourself when you have a journal nearby.


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