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Since I began trading options in 2022, I’ve spent a lot of time exploring different strategies, reading charts, and learning the nuances of this fascinating corner of the financial markets. Among the various strategies I’ve tested, one has consistently stood out for me—not only in terms of ease of use, but also for its practical benefits: selling put options.
When I started, options trading felt like learning a new language. Calls, puts, premiums, deltas—it was overwhelming at first. But the more I practiced, the more I realized that selling put options aligned best with my financial goals, my risk tolerance, and even my cash flow expectations.
In this post, I’ll break down exactly why selling put options makes the most sense for me (and possibly for others just getting started), how it compares to selling covered calls, and I’ll also share a few examples—like my experience with SOFI and Tesla—to illustrate the key points.
What Is a Put Option (and Why Sell It)?
Let’s quickly recap for those who may be newer to the world of options: a put option gives the buyer the right—but not the obligation—to sell a stock at a specific price (the strike price) before a set expiration date. When you sell a put option, you’re taking the other side of that bet. You’re agreeing to buy the stock at the strike price if the buyer decides to exercise the option.
Why would anyone want to do that?
Because you get paid to do so.
When you sell a put, you collect a premium—that’s your compensation for taking on the potential obligation to buy the stock. If the stock stays above the strike price, the option expires worthless and you keep the premium. If the stock dips below the strike, you might have to buy it—but at a discount from where it was when you opened the trade.
That’s the first thing I love about selling puts: you’re essentially getting paid to wait for a stock you’d like to buy anyway—but at a better price.
The Advantages of Selling Put Options
After almost three years of trading, here’s what I’ve found to be the biggest advantages of selling put options:
1. You Don’t Need to Own the Stock Upfront
Unlike selling covered calls, which requires owning 100 shares of the stock (a potentially expensive investment), selling a put option doesn’t require you to own anything at first. You’re simply committing to buy the stock if it falls to your chosen strike price. This makes put selling a more accessible strategy for traders with smaller accounts.
2. You Collect a Premium—Upfront
That premium you collect? It’s yours the moment you sell the put. If the stock doesn’t drop below the strike price before expiration, you just pocket the money and move on. This can become a consistent income strategy, especially in sideways or mildly bullish markets.
3. You Can Get Stocks at a Discount
If the put gets assigned (meaning the stock drops below your strike price), you end up buying the stock—but usually at a discount to its recent trading price. It’s like getting paid to set a limit buy order.
4. Lower Capital Requirement Compared to Covered Calls
To sell a covered call on Tesla, trading over $400 a share, you’d need to own 100 shares, which means $40,000 tied up just to enter the trade. That’s a high barrier for a lot of retail traders.
With a put option, however, you can select a lower strike price—say $300—and now your buying obligation (and collateral requirement) is just $30,000. That gives you more flexibility and better use of your capital.
Real-Life Example: SOFI vs. Tesla
Let’s take two real-world examples to put this into perspective.
SOFI Technologies (Ticker: SOFI)
Back when SOFI was trading around $20, I saw an opportunity. If I sold a put option with a $17.50 strike price, I’d be committing to buy the stock at that level if it fell. For one contract, that’s just $1,750 in collateral.
What’s great here is the affordability. With less than $2,000, I could collect a premium (maybe $50 or $75, depending on volatility and expiration date) just for being willing to buy a stock I was already interested in—at a discount.
Even better, if SOFI stayed above $17.50, the option would expire worthless, and I’d just keep the premium.
Tesla (Ticker: TSLA)
Now compare that to Tesla. At over $400 per share, you’d need $40,000 to own 100 shares—just to be eligible to sell a covered call. For a lot of traders, that’s simply out of reach.
Even if you tried selling a put on Tesla, you could choose a strike like $300, which would only tie up $30,000 in collateral. Still a lot, but significantly lower than $40,000—and you don’t need to buy Tesla right away. The difference in capital requirement can’t be overstated, especially when managing a smaller or mid-sized trading account.
Why I’m Sticking with Put Options
Having tried both strategies—selling puts and selling calls—I’ve decided to stick primarily with put options for several reasons:
✅ Flexibility Without Ownership
You don’t need to buy the stock unless the trade goes “against” you (and even then, you might be happy to own the stock at a discount).
✅ Easier Capital Allocation
Smaller positions like SOFI allow you to scale into multiple trades instead of putting all your capital into one covered call position on an expensive stock like Tesla.
✅ Lower Emotional Stress
Covered calls can be stressful if the stock shoots up, and you’re forced to sell at a lower strike. With puts, if the stock drops, you’re getting it cheaper—and you already collected a premium to do so.
✅ Better for Neutral-to-Bullish Outlooks
Selling puts works best when you’re neutral or slightly bullish. You’re betting the stock won’t drop too much. In that sense, it gives you a bit more breathing room than calls.
Risks of Selling Put Options
Of course, no strategy is risk-free.
❗ Risk of Assignment
If the stock drops well below your strike price, you could be forced to buy a stock that’s significantly underwater. This is why it’s important to only sell puts on stocks you actually want to own.
❗ Margin Requirements
While you don’t need to own the stock, you do need to have cash or margin in your account to cover the potential assignment. This can limit your ability to open new trades if your buying power gets tied up.
❗ Opportunity Cost
If the stock rises quickly, you miss out on the upside gain. But for many traders (myself included), this is a tradeoff we’re willing to make in exchange for collecting consistent premiums.
Key Tips If You’re Considering Selling Puts
Here are some personal guidelines I’ve developed over the last few years:
- Only sell puts on companies you’d be comfortable owning. If the stock drops and you get assigned, you don’t want to be stuck with a company you don’t believe in.
- Use cash-secured puts, not naked puts. Always make sure you have the funds to cover the purchase if assigned.
- Focus on high-quality stocks or ETFs. The goal is to generate income with reasonable risk—not gamble.
- Stick with shorter expirations (1-4 weeks). This allows for quicker premium collection and more flexibility.
- Look for premium-to-collateral efficiency. A $50 premium on $1,000 collateral is a 5% return for the period. That’s solid, especially if you can repeat it regularly.
Final Thoughts
Since starting my options trading journey in 2022, I’ve tried different strategies, but selling puts has remained my favorite by far. It’s simple, scalable, and fits my personal trading style. You don’t need to own shares up front, you get paid to wait, and you can often buy quality stocks at a discount—all while collecting consistent premiums.
Of course, every trader is different, and you should always do your own research. But if you’re looking for a lower-barrier way to enter the options world and generate steady income, selling puts might be worth exploring.
For me, it’s not just about making money—it’s about building a sustainable, low-stress approach to trading. And selling puts has been a key part of that journey.
