Can you really make so much money selling options?

[Anonymous]

I follow a few personal finance people on Twitter. The most interesting development I’ve learned of is selling stock options – covered calls and cash-secured puts.

I’m still just researching and learning so no actual experience yet. However, many claim to be earning 15-20+% on their money by doing this. If so, it would totally blow out of the water the standard 3% withdrawal rule for retiring early. (Some of these Twitter people sell an e-book describing their methods for a nominal fee, so you could say they are not impartial. However, some don’t sell any product or service, and I’ve seen these numbers repeated so much by different people that I’m inclined to believe they are not way off base.)

Does anyone here have experience with selling options? How long did it take you to get good at it? Imagine generating $100K annually in semi-passive income on a capital base of only $500K – wow.

[Anonymous]

No.

[Anonymous]

you need to put your money in something safe and conservative because you are an idiot.

[Anonymous]

This is not a “retirement strategy,” which requires reliable, steady income.

Selling covered calls sounds great until the market surges and you lose the upside. Sure, you can roll an ITM call, but if the stock starts a longer-term uptrend, you’re just deferring a loss and missing the stock’s run. Since stock prices are biased upwards, you’re playing against the odds.

Writing cash secured puts is great in a down market because it’s less likely that the stock or index will continue down. If it’s a stock or index you would like to own anyway, you’re getting paid to wait. Also, due to the positive skew in stock prices, you’re playing like the house. Ideally, you want to sell when implied volatility is high.

[Anonymous]

I would love to go the Option route. But I spent time with two good friends that do this, but both are former 80s Wall Street traders and they said that you should never do it unless you are well educated. And to really make money you are chained to the screens all day long. One less so than they other, but they were both on the floor together, and the one less "chained" makes less money.

I have another friend who dabbles in it and says he makes money. I'm not sure how much as he has a very demanding full time job. So not sure how much time he spends actually doing it.

I have relative who day trades. He wins big and loses big.

Depending on your age, time you have to undertake options trading and ability to lose money, informs how much risk you should be taking.

[Anonymous]

Yes you can make a lot of money with options. You also can lose a lot of money with options.

[Anonymous]

Yes you’ve am also lose a lot.

[Anonymous]

Anonymous wrote:Yes you can make a lot of money with options. You also can lose a lot of money with options.

I am PP right above this one. This is the TL;DR version of what I said. 😂

[Anonymous]

Anonymous wrote:

Anonymous wrote:Yes you can make a lot of money with options. You also can lose a lot of money with options.

I am PP right above this one. This is the TL;DR version of what I said. 😂

+1. There will be times when you can make a killing (with high risk of course) and times when you won't (you will either lose money or will be on the sidelines because the market is not to your liking). It's a great way to supplement your income, not replace it.

[Anonymous]

To the OP’s question, the OP can do the math as follows. Example: TSLA weekly 220 call would generate $420 income if sold today, tuesday. If this was repeated 52 weeks a year, 420 times 52 is the income on $22000 in stock equity. Not getting into other factors like stock appreciation or decreases in the stock, or the stock being exercised.

[Anonymous]

Anonymous wrote:To the OP’s question, the OP can do the math as follows. Example: TSLA weekly 220 call would generate $420 income if sold today, tuesday. If this was repeated 52 weeks a year, 420 times 52 is the income on $22000 in stock equity. Not getting into other factors like stock appreciation or decreases in the stock, or the stock being exercised.

That really over simplifies it, there is no way to make the same amount every week as volatility changes.

Options can be a great way to make money but they have a lot of downside risks so you have to be incredibly careful. Covered calls and cash secured puts are the simplest to understand and a lot of people use them to get a bump on their gains. Most people who claim to make big money tend to ignore their losing positions and only highlight the wins. This is true in many investments because it is a lot like gambling, nobody wants to talk about losing $10,000 at the blackjack table but they love to say how much they won that one time.

[Anonymous]

I have probably 10+ years of selling options. 100k per year on a 500k portfolio would require extreme risk that would wipe you out more often than not.

I would aim for .50% per month, which is difficult in itself. This is selling puts.

Selling covered calls won't wipe you out but will really cap your gains over the long run. For short term windows, it's fine. Selling uncovered calls is not smart.

[Anonymous]

Anonymous wrote:I have probably 10+ years of selling options. 100k per year on a 500k portfolio would require extreme risk that would wipe you out more often than not.

I would aim for .50% per month, which is difficult in itself. This is selling puts.

Selling covered calls won't wipe you out but will really cap your gains over the long run. For short term windows, it's fine. Selling uncovered calls is not smart.

Newbie question.. If 0.5% per month (6% p.a.) is difficult, why even bother? Doesn't the S&P return much more than that over the long-term?

[Anonymous]

Ask yourself the question: am I really that god-like that I've discovered a risk-free profit source from YouTubers. If you're honest with yourself...

[Anonymous]

Do yourself a favor and do some paper trading for a while before you start trying this with real money