What Is A Good Pe Ratio In Indian Stock Market Build Wealth Online With Put Option Trading

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Build Wealth Online With Put Option Trading

The stock market is one of the most popular ways to make money. Within the stock market a very very lucrative way to build wealth is options trading. I make 15 t0 20% every month by trading options, more specifically put options.

There are two sides to put options trading. There is the side of protection on your account aka buying insurance for your stock, and then there is the wealth building, monthly cash flow side aka getting paid to own a stock. Let’s take a quick look at both.

Buying Insurance with Put Options

As the owner of a the put options contract, you have the “option” to sell a stock at a certain price up until you sell the option or the option expires.

Most investors use puts to protect their account from big movements to the downside as well as lock in profits. For example, lets say an investor bought a stock and it went up in price by about $10 per share. This is a pretty big move.

Now the question you might be asking is…should you take profits or let it ride? Also you have to consider that if you do nothing, your profits could be wiped out in minutes with some bad news. Taking no action is one of the worst things you can do in the stock market.

What do you do in that situation?

You can buy a put option at a strike price which is a few prices below the current price of the stock. By doing this, you will be able to sell your stock at that strike price no matter what happens to the price of the actual stock. For example, if you bought the stock at $200 and it went up to $250, you could buy the put at $240. With the $240 put option, no matter how low the stock goes, you can still sell it at $240! So, if the stock drops to $30 per share, you can STILL sell it at $240, think about that for a second…let it sink in.

Making Monthly Passive Income with Put options

On the other side of the put options coin is how you can build wealth with options by making passive income every month.

In order for the stock investor to protect his stocks by buying protective puts, he needs to have someone willing to sell those put options to him.

I make money every month by selling put options against stocks I would be willing to own and sometimes even against stocks that I never plan to own.

The key to building wealth with put option selling is to sell puts on stocks you would not mind owning and to also look for stocks that are relatively flat as far as their price goes. Flat stocks are stocks that move no more than $3 in a month and have very low PE ratios.

I find that I also have a lot of success by trading stocks in the $20 – $30 price range. Anything higher or lower tends to be too risky in my experience.

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