Make Money Selling Cash-Secured Puts for Passive Income

We’ve written about the allure of making money selling covered call options. Honestly, this is how I make half my income. However, there is another derivative I prefer even more. That would be selling put options. Many investors, including myself, prefer selling puts over selling calls, because there’s even less risk and more profitability.

What Is A Cash Secured Put Option?

Like a call option, a put option is a financial market derivative instrument which gives the holder the right to sell an asset, at a specified price, by a specified date to the writer of the put. The purchase of this put option signifies a negative sentiment about the future value of the underlying stock. When you sell a put option, it signifies a positive sentiment about the future value of the underlying stock.

Selling a cash-secured put involves selling an at-the-money or out-of-the-money put option, while simultaneously setting aside enough cash to buy the stock should it fall below the strike price. Besides collecting premiums, put sellers also may acquire the stock below the current market price if the option is exercised.

You see, unlike with an outright stock sale-and-purchase transaction, this seller is only really on the hook if the shares exercise. That’s why it’s…