Hey there, Awesomely investor! Andy Tanner here, with a blog post that’s all about the best stocks for selling puts.
The phrase “best stocks for selling puts” might sound like Wall Street wizardry. But stick with me, because understanding the best stocks for selling puts can turn you from a nervous newbie into a confident, cash-flowing investor.
In fact, using the best stocks for selling puts is like getting paid to wait for a sale on your favorite blue-chip companies.
Who doesn’t love a good bargain, especially when you’re paid to stand in line?
Today, I’m gonna break down what selling puts really means, how to identify the best stocks for selling puts, and most importantly, how to manage the risks that come with this powerful strategy.
Let’s get to it…
What Does “Selling Puts” Actually Mean?
Imagine you want to buy shares of a solid company, but you wish you could get them at a discount…
By selling a put option, you’re making a promise: If this stock falls to a certain price, I’ll buy it from you.
In exchange for that promise, you get paid a premium upfront.
If the stock never drops, you keep the cash. If it does, you buy a company you wanted anyway… at a lower price, minus the premium you received.
That’s the magic of the best stocks for selling puts.
Know this: There’s no more risk in this than buying the stock outright. And you can always get out of the contract if you want.
Focusing on the Best Stocks for Selling Puts
Not all stocks are created equal…
The best stocks for selling puts are companies you’d be thrilled to own… think household names with strong fundamentals, steady cash flow, and plenty of trading volume.
When you focus on the best stocks for selling puts, you stack the odds in your favor and set yourself up for consistent, repeatable income.
Here’s what I look for in the best stocks for selling puts:
- Strong, Stable Businesses: You want companies with a track record of profits and resilience… think Coca-Cola, Amazon, or Micron.
- Plenty of Liquidity: High trading volume means you can enter and exit positions easily.
- Reasonable Volatility: Some movement is good (it means higher premiums), but wild swings can be risky.
- Stocks You’d Buy Anyway: The best stocks for selling puts are those you’d be happy to own at the strike price.
Real-World Example: Warren Buffett’s Put Strategy
Let’s take a page from Warren Buffett’s playbook…
Buffett once sold millions of puts on Coca-Cola, agreeing to buy the stock at $35 per share.
For making this promise, he collected $1.50 per share, pocketing $7.5 million upfront.
If the stock stayed above $35, he kept the cash and never had to buy. If it dropped, he bought a world-class company at a discount, minus the premium.
That’s textbook use of the best stocks for selling puts.
Managing Risk: The Heart of Selling Puts
Now, let’s talk about the elephant in the room: risk.
Even with the best stocks for selling puts, there are risks you need to manage…
The biggest?
The stock could fall below your strike price, obligating you to buy it at a higher price than the market.
But here’s the kicker: If you only sell puts on the best stocks for selling puts… companies you want to own anyway, the “risk” becomes an opportunity.
You’re getting paid to potentially buy a great business at a price you already like.
Here’s how I manage risk when selling puts:
1. Know Your Break-Even Point
When you sell a put, your real risk is the strike price minus the premium received.
For example, if you sell a put with a $35 strike and collect $1.50, your break-even is $33.50. That’s your true cost basis… even better than just buying outright.
2. Size Your Positions Wisely
Never risk more than you’re comfortable owning.
If you’re selling puts on Amazon, make sure you have enough cash to buy the shares if assigned. The best stocks for selling puts are only “best” if you can afford them.
3. Diversify Across Sectors
Don’t put all your eggs in one basket.
Use the best stocks for selling puts across different industries to spread out your risk.
Think of it like having both chocolate and vanilla in your ice cream freezer… if one melts, you’ve still got dessert. 😉
4. Set Exit Rules
If a stock drops sharply, you can always buy back the put and cut your losses.
Risk management is about having a plan before things go sideways. You can always get out of a contract if you want.
You might be thinking: “Andy, what if the stock keeps dropping after I sell a put?”
Well, that’s a risk you were willing to take anyway if you were going to buy it at that price. If you chose the best stocks for selling puts, you’re happy to own them long term.
And remember, you can always close the contract if your outlook changes.
The Best Stocks for Selling Puts in Action
In my own trading, some of the best stocks I’ve used for selling puts is on companies like Micron and U.S. Steel.
For example:
- Selling a put on Micron at a $50 strike, I might collect $2.27 per share.
- If the stock stays above $50, I keep the premium.
- If it dips, I buy shares at an effective price of $47.73… lower than the market price at the time.
That’s the power of using the best stocks for selling puts.
Checklist: How to Find the Best Stocks for Selling Puts
- Look for companies you’d love to own.
- Check for high trading volume.
- Make sure the stock has reasonable volatility.
- Confirm you have enough cash to buy if assigned.
- Diversify your choices.
- Always know your break-even.
If you follow this checklist, you’ll be using the best stocks for selling puts the smart way… turning risk into opportunity and cash flow.
Final Thoughts: Turn Waiting Into Winning
The best stocks for selling puts aren’t a secret… they’re the companies you already admire and want to own.
By focusing on the best stocks for selling puts, you can generate income, buy quality businesses at a discount, and manage your risk like a pro.
Remember, risk management is the name of the game… even with the best stocks for selling puts.
Ready to start investing in the best stocks for selling puts?
Review your watch list, pick your favorites, and let the best stocks for selling puts work for you.
And if you’re still unsure, just remember: Getting paid to wait beats waiting for a payday.
Want to learn about the best stocks for selling puts? Take a look at the training program I crafted with Awesomely: Cash Flow Machines. We share actionable stock options training, as you discover the financial rewards, including compounding effects, of this awesome form of investing.
Enjoy!