How I Sell Put Options For High-Probability Income (My 5 Rules)

five steps. That's the entire framework that we use in our put selling newsletter, which always puts us at around a 95% probability of profit on every trade. So, in this video, I'm going to give you those five steps that we use so you'll know how to do it yourself. All right, so let's just jump right in. All right, everyone. Leel here from smart optionseller.com. What you see in front of you is the cheat sheet selling put options. the Smart Option seller method. If you don't know, we here at the Smart Option Seller, we sell put options. That's our main gig. That's pretty much all that we do. And if you've never sold put options before, and if you want to understand how it works, down in the description below, I put the link for my free ebook. Yes, free ebook all about selling put options. Now, what we're going to talk about today is the exact five-step framework that we use when we actually sell put options in our newsletter. And we're going to run through the steps. I'm going to show you an example, pull up the option chain, pull up the probability calculator, and then I'm going to show you a scanner that you can use to find your own put selling trades. Okay, so let's talk about this for a second. Let's just back up, make sure we're all on the same page. When you sell a put option contract in the stock market on a stock or an ETF, whatever you choose, you're going to get paid upfront when you sell that put option. And in return for receiving that money, you are going to put yourself basically on the hook to potentially buy shares of that stock at a price that you choose. Okay? So, if the stock's at 100 and you want to buy the stock at $70, let's say, for example, what you do is you sell a 70 strike put option contract. the strike price is is considered where you would have to buy the shares of the stock. So you sell that strike price and you collect your money right up front from the put option buyer and if certain things come around in the future towards the expiration date will decide whether you actually have to buy those shares or not. Okay. Most people like to sell put options uh uh strike prices where they won't get what's called assigned. They won't have to buy the shares. They just want to collect the income. So, we're going to talk about how we do it in our newsletter. Very conservative. When we when we teach people how to sell put options, we want to do it in a very conservative way because we don't want them to get scared out. We want we want them to stick around for a long time. So, we so we do it very conservatively. All right. So, let's talk about how we do it. Here's the the five steps. I want to show you how we do it and then we'll look at example. Now, number one, when you sell a put option, you have to choose a stock that you're going to sell those put options on. And typically, you want to be bullish on that stock because selling put options is more of a bullishly oriented type of trade. So, you're going to want to pick a stock that number one, you're you're mostly bullish on. And this is most important, you would be willing to buy shares of that stock in the future if it came down to it. Okay? Don't sell put options on stocks that you have no interest in potentially owning down the road. Now, how do you decide which stock it's going to be? Well, that's up to you. You have to do your own research. You have to figure out what stock you want to buy. For us, it's mostly about technical analysis. And I'm going to show you the chart in a minute. Okay. Step number two right here. Follow my mouse. [clears throat and cough] In order to to play this very conservatively, you want to pick a strike price that is 20% below the current price of the stock. So, if the stock's at 100, 20% below that would be an $80 strike price. That's what's called a 20% buffer. You're going to sell what's called out ofthe money put option strikes. Stocks at 180 strike listed below it. 20% below is what's called an out-ofthe- money strike. Okay, that's step number two. Number three, also very important, you want to pick an expiration date for that option that comes before the stock's next earnings announcement. As you know, earnings announcement, earnings announcements are a crapshoot. The stock could go up big, the stock could go down big. You don't want to put yourself in a situation where the stock's going to drop really big on you. You don't want that to happen. So step number three, very important, make sure the expiration date you choose is before the next earnings date. And I'll show you and and you can find earnings dates anywhere on the internet, but I'll show you the website that I like to use as well. Step number four, and this is where the conservative part comes in. When you sell the put option, you're going to get money for it. And it could be all different amounts of money based on the strike price that you choose and how far out in expiration length that you go. But what we do is number four right here. We choose the shortest expiration date for that contract that will pay us at least 25 cents per contract. Okay? When you sell an option, it's called um you it's called per contract, the price per contract. And I'll pull up the option chain and I'll show you 25 cents per contract. Now, that's 25 actual dollars for every option contract you sell. And every option contract contains 100 shares of stock. So, when you sell that put option, you're putting yourself on the hook to buy 100 shares of stock. If you sell 10 option contracts, you're on the hook for potentially buying 1,000 shares of stock shares of that stock. And you'll have to pay for those shares of stock at expiration if it comes to fruition. So, you need to make sure that you have the money to at least cover 100 shares of buying that stock. Okay? But in the meantime, you're going to sell that put option and you're going to get $25 for your time and effort. Now, some people will say $25, that's not a lot of money. Well, as I said, we're doing this very conservatively. We want to make sure that people understand how it works. So, we take very safe trades here. 25 cents per contract. Now, number five step here. Once you sold the put option, now you'd have to just kind of wait it out and see what happens. You need to see where the stock will end up at expiration. Now, you can always get out of the trade before expiration. options, you don't have to hold it all the way until the expiration date. What you can do, and what we like to do when we sell a put option at at at $25 or 25 cents per contract, we end up typically buying that option back when the price of that option gets really cheap, but at typically about 5 cents or cheaper. So, we sell it at 25 cents. Later on down the road before expiration, we'll buy it back for at least 5 cents and we'll lock in the difference and the trade is over at that point. So you can hold on to the trade until expiration. You can wait to see if the option expires worthless. You can wait to see if you get assigned which means now you have to buy the shares of the stock or right here or you can roll the option if necessary. If the stock starts to tick down on you and you're like I don't I I want some more buffer of safety. What you can do is roll the option means you'll buy back that current put option that you've sold and you'll sell another one for further out expiration date uh for a lower strike price. Okay. So, I just wanted to go over some of the ground rules here. Those are the five steps. We're going to I'm going to walk you through it and we're going to look at the chart. We'll look at the option chain, look at the probability calculator, look at the earnings dates, and then we'll look at Option Samurai, which is the um the option scanner. Now, I'm going to put links for everything down in the description. So, make sure you look down in the description to at least get the free ebook. And then I'll put links for everything else. Now, a couple considerations here down here. You will have to have a brokerage account in order to sell put options. And it's either going to be a cash secured or a margin account. It's up to you to decide or your broker will give you the approval for it. And you have to be approved by your broker to sell put options. Okay? And there's also the the the options of, you know, you're just selling these put options just to collect the money or andor you really want to buy the shares of the stock. So, that's going to be up to you. and and I'll show you the P&L calculations and as I said you can always close the trade at any time you wish. Okay, so let's just jump into the U charts here and we're going to talk about the uh silver the silver ETF SLV here's my mouse up here in the corner SLV. Now once again as I always say in every video this is purely an example only. I am not telling you to sell put options on silver. This is not a recommendation. This is just just me showing you how it works, okay? Because I always get comments after I make these videos. People ask me, "Why did you choose that stock or why do you choose this stock? What's wrong with you know, please, this is an example only." Okay, so we're looking at silver. And if we were to do a sell a put option on silver in our newsletter, the first thing that we do is we look at the stock chart. Now, as I said, it's more of a bullish oriented trade. So, we want to see the stock or ETF moving up, you know, over the last year or two. And this is silver hit a all-time high in February of 2026, right before the Iran, right around when the Iran US war started. And then it's fallen back since. But it seems to have been seems to have found a bottom here right around $50. So, you know, if you do your chart analysis, you can make a little um support level here. So, $50 seems to be a good support area for silver. Let me just kind of get this straight if I can. Okay, so there there's our support level. And silver's starting to go back up. So, we're thinking, okay, I'm bullish on silver. I like the silver market. I want to potentially get some shares of silver, but I don't want to get it at its current price of $58 per share. I want to choose a a level below $58 and out of the money level where I' where I would like to buy shares of silver. So, as I said, our rule, 20% below the current price of the stock is what you can key in on. So, 20% below that is about 16 and I'm sorry, about just under $12 below 58. So, that would put us somewhere between below $46 would give us that 20% buffer. So, now that you know what the 20% level is, at least $46 or below, now you go to the option chain. So, now let's pull up the option chain. This is an option change. option chain for silver and we're going to look in um we're going to go to out to the November 20 20th 2026 68 days in the future and we're going to look for um the option price. Okay, put options over here. Here's your strike prices. Now, we had mentioned $46. Now, I I'll show you a different expiration date as well, but if we were looking at 68 days out in the future, which is typically, you know, a a short enough time to play this thing. You got $46 is your 20% buffer. Uh 49 bid at 53 offer. So, you could probably sell this thing for at least 50 cents per contract. I had mentioned that we look for at least a 25 cent per contract. So, we're going to go down a few more strikes. the 43 strike, we can sell this thing for about 28 cents per contract. So that's higher than our 25cent limit. And $43 is about $15 below the current price of silver. So that's an even bigger cushion than 20%. Okay, that's this November expiration. If you wanted to go a little bit shorter, you can go out to the October expiration, which is only 33 days into the future. Now remember, you have to look for a strike that pays at least 25 cents and is 20% below the current price of the stock. So here you go. Uh this one, the 48 puts are pro you can probably sell that for a quarter 25 cents, but it's only about $10 below uh the current price of the stock. So it doesn't meet our 20% buffer. So that's why we want to go back to the November expiration date and key in on anywhere between 46 and 43. So let's be really super conservative here. Now you can choose any strike you'd like. I'm just telling you how we do it in our newsletter. I want to teach everyone how to do this in a really safe environment because why 20% most of the time in between earnings announcement most stocks should not be falling 20% from where they currently are now and most normal days you know you can't plan for surprises if a CEO is cooking the books and it and it gets found out or or or FDA announcement for a a new drug that a company was trying to create failed th those things you can't plan for but on normal times 20% a stock should not be fall a good stock should not be falling 20% for no reason. Okay, so that's the 20% rule. So let's key in on these 43 puts. We're going to sell this thing for 28 cents per contract and you click on the bid price in your broker platform which I already did. So I brought up the opt the the order line here. Now, in order to figure out how much money you have to hold aside or how much collateral you need to sell a put option, um we can see here I'm going to click on transmit and it's going to bring up a box here that says this tells us over here how much money you're going to need. Now, depending on whether you use a margin account or cash secured account, if you use if you sell put options in a cash secured account, you're going to have to hold aside the full value of that contract as if you were actually buying a 100 shares already. So, if we're going to sell this 43 strike put 100* 43 is $4,300. You would need to hold aside or have a reduction in your buying power of $4,300 in order to sell this thing. and you would collect $27 for it. Um, but you'd have to hold aside or reduction in buying power of $4,300. That's if you're using a cash secured account. Now, if you sell it in a margin account, this is the number. This is the actual dollars that you would have to hold aside or reduction in your buying power. $342. So, out of the $4,300 as cash secured, if you're using a margin account, you'd only hold aside $342. So, it's a lot less money that you'd have to hold aside. But just know if you have to come through and buy your 100 shares and pay $4,300, you'd have to come up with the balance from this $342. So, you need about another just less than $4,000 you'd have to come up with at expiration. Okay. So, let's close this thing down. So, now we've decided we're going to sell a 43 strike put option on silver and we're going to collect $28 for it. What happens next? What do we do? Okay. Well, that's the next step is that you just wait until expiration. You wait around to see where the price of silver at at $58 right now. Where's it going to go? If silver remains above $43, that option will expire worthless and you'll keep your full $28 and you don't have to buy your 100 shares at $43. If the price of silver drops below $43 at expiration, then the put option buyer is going to make you buy from them 100 shares at $43 and they're going to sell you those 100 shares at $43 um. So, you have to come up with your $4,300 uh and then you get yourself a 100 shares of silver. Now, you get to hold on to those for however long you can hold on to them. You can sell covered calls on them now. Whatever you want to do. Okay. But in most cases, this option will expire worthless. And as I said earlier, you can always buy it back cheaper. That's what we do in our newsletter. We wait for we have our 80% rule. We wait for that option to decline in value by 80%. Typically, if we sell it for, you know, 28 cents, if it loses 20% of its value, we buy it back at five, six or seven cents per contract, and we just lock in the difference. Now, the probability of of this option expiring worthless, you can look at the delta. The delta is a good gauge of what the probability is that the stock's not going to fall that far from 58 down to 43. It's only about a 5% chance of that happening. We can also use our our probability calculator. Let's go to the probability calculator right now that we have on our website. We have two versions. We have this our original version and down below here we have our little more updated version, but I'm just going to use the original version here. So, silver's at $58 a share. Okay. Our future date is going to be November 13th 20 uh November 20th, 2026. That's the expiration. the volatility which we can get from the option chain here the 43 puts probably about 56 46 a.5% uh volatility. So we're going to put in 46 around at 46.6 and we want to know what the chances of it of silver falling down to $43 one number in the next 68 days. So here's what it's telling us. The probability calculator is telling us there's a 93.16% chance that silver's going to finish above $43. Not quite the 95% but very close to the 95%. Okay, so you can use the probability calculator and or you can use the delta to help you figure out what are the chances of the stock falling that far. Now, having a 93 to 95% chance of the stock not falling that far means you have a 93 to 95% chance that you're not going to have to buy your shares for 20 for $43 and you'll just walk away with your, you know, your $28. Okay, that's how it works. Now, if you wanted to potentially buy silver and you and you were okay with buying it a little bit higher, what you can do is you go back into the option chain and see how much more money can I get uh if I buy if I want to buy silver for let's say $50. Okay, so now you're going to get about $110. You can see here's the bid, here's the ask, sell it somewhere in between. So now you can get $110. Now you're on the hook to potentially buy silver for $50 a share. Okay? So, it's up to you to decide how much money you're willing to collect, how what price that you want to potentially buy the shares of that stock and then you sell that put option. There is no right or wrong. I'm just telling you how we do it in the newsletter. We do it very safely. We want these things to expire most of the time. Okay? A lot of people in our newsletter don't want to um buy the shares of stock. They just want to collect the money. That's why we take that 20% buffer. Completely up to you. The other thing is that the longer out in time you go, the more money you'll get. So if we go out to January and you look at those same 43 strike puts, uh you're going to get um you know about 686 $69 for it. Okay? So the longer out in time you go, the more money you get. Okay? So I I want to show you also the let's go to the um website where you can get earnings announcements. Okay. Market chameleon.com. I'll also put a link down there for market chameleon.com, but you can find earnings dates anywhere. Uh right here, I've got Verizon in here. So, along the left side here, you can check earnings. You can check what's called release dates. And here's the most upcoming earnings dates. Somewhere between October 23rd and October 28th, 2026. It hasn't been decided what date yet, but as we get closer, this date will turn into an actual date. Okay? So, you can find your your earnings dates anywhere else, anywhere on the internet, I should say. Okay. Lastly, we want to talk about option scanners. How can you actually find trades um that you can potentially sell put options? And if you don't know, you know, how to find a stock, you know, by doing your research, people come to me and say, Lee, how do how do I actually find stocks that I can sell put options on? You can use a scanner such as optionsamurai.com. Okay? You can see up here in the link down in the description as well. So what when you get into opt uh options samurai you'll come to the homepage the screener up here screener see my mouse you want to go on the predefined scans and click on naked puts and one of the one of the the predefined scans is you can change all the parameters you click on this high probability naked puts of good companies that they'll probably expire worthless. Okay if you if you just want the the option to expire worthless you could um choose that scan. So, you're going to have all the descriptions over here. You can change all the filters, but this one is defaulted by them, and you get about I don't know, there's 10 stocks here. So, what you want to do, uh, IV rank is is is an important one. It tells you how expensive those options are based on its its past. The higher the IV rank, the more money you get. Okay? So, you can filter this for IV rank. And if you want to change the number over here, if we want anything over 50% IV rank, we can move the number here, the slider, put in that 50, and then we rerun the scan. So now it it it it gets uh more I'm sorry, less options for you to choose from. Okay. And these are companies that we know. Dell, uh KA Corp, uh ARM Holdings, Wheat and Precious Metals, that's a silver, Qualcomm, Meta. So these are these are companies that that you've heard it and you that you've heard of and you know and also we can see the earnings date is after expiration. So that's very important. Okay. So now you've got potentially 1 2 3 4 5 six stocks you can choose from. Dell has a high IV rank the strike price um and and you can choose the moneyiness which means how far below the the stock price you want it. So, uh, Dell is a very expensive stock. Now, in our newsletter, I forgot to mention that we only use stocks $50 and under or strike prices $50 and under because we we don't a lot of our customers or I should say our members don't want to spend that much money if that if they have to buy shares of stock. So, we choose strike prices $50 and under. You can see Dell's a very expensive stock. The strike price is about $107 below um where it is now. So, that's right here. You can see that's an 18.9% um buffer. Okay. So, if you're cool with that, you know, you can click on Dell and it's going to bring up the stock chart. Down here, you can see the stock charts in an uptrend, the strategy. It it gives you the P&L profile. So, you can potentially find stocks in uh options.com. Okay. So, that's it for the five steps that we use. We can go back to the cheat sheet here. Let me bring that up real quick. Once again, you're going to pick a stock more of a bullish oriented type of stock. You got that 20% buffer. Make sure that the earnings dates is after the expiration. You want to choose the shortest expiration where you get at least 25 cents per contract. And then you can decide what you want to do before expiration. Now, the last last thing I want to talk about is the potential money you can make. And people always ask, well, what kind of returns can I get on this? $25 is not a lot of money. Now, depending on whether you use a cash secured or a margin account, that'll give you your return on just the the premium income you choose. But you also have to understand that's not the only kind of return you can get. Yes, that is you're able to figure that out right away. But if you get assigned and you do have to buy the 100 shares of stock now, you're holding an asset that you have that has potentially unlimited returns in the future. So don't think that selling put options, the only returns you're going to get is how much money you get versus what's your reduction in buying power. But we're going to figure that out right here. I got the calculator. So, if you were to sell this 43 strike put for $28 and you're using a a margin account, so it's uh and and if you let the thing expire and you made the full $28, it would be $28 divided by $342, which was the requirement if you had a margin account. So, that's an about an 8% return in those 68 days. And if you wanted to annualize it, um, that would be about a 42% return annualized if you're using a margin account. And you can do this trade every 68 days or so. If you're using a cash account, it would be $28 divided by $4,300. So that's, you know, less than a 1% return in those 68 days. So it' probably be about a three 3 to 4% annualize. Okay. So the more money that you have to put up, the more reduction in buying power, you know, the less your your return is going to be on the premium you receive. But as I said, don't let that be the deciding factor on whether you sell put options or not. Because if you get assigned, now you have something that you could sell covered calls on. You could let that thing run for years and years and now you have potentially unlimited upside potential. Okay? So don't think that that's the only money you're going to get. Now, the only return you're going to get, now remember, you can choose a different strike price. You can choose a further out expiration date. You can get more money. If you sell a $43 put for, you know, a year out in time and collect a hundred bucks, it's still that $4,300 that you have to put up, but now you're collecting more. So, your potential return could be possibly bigger. Okay. So, that's that for selling put options. the way we do it. Once again, links down in the description for everything that we talked about today. Hope this has been helpful for you. Leave me a comment, give me a like, give me a thumbs up. Don't forget to subscribe, send me an email, and on the screen here, I'm going to put another video on selling put options. All right, that's all for me today. This is Lee LOL. See you in the next one.