Home MarketXLS
Dashboard MarketXLS
Screener MarketXLS
Stock Ranks MarketXLS
Spreadsheet Builder MarketXLS
Logout MarketXLS
OptionsOptions strategies

Selling Weekly Put Options For Income (With Professional Risk-Management)

Written by Pooja Tanwani (Individual Contributor)
Wed Nov 25 2020
See how MarketXLS helps you take advantage in the markets.
Download Option Templates →

Most of the investors are inclined towards the options because it offers a great source of income generation. Call and Put strategies help an investor to generate income and hedge the risk of their portfolio.

What is Options Trading?

Options are the contracts that give the holder the right but not an obligation to buy or sell the stock of an underlying asset at the strike price on or before the expiration date. The call option gives the buyer the right to buy while the put option gives the right to sell. The option seller(writer) receives the premium amount for selling this right to the buyer. Investors are attracted towards writing options as the premium is a non-refundable amount irrespective of the buyer exercises its right or not.

Why selling weekly put options?

Based on a CME study of expiring and exercised options covering three years (1997, 1998, and 1999), an average of 76.5% of all options held to expiration at the Chicago Mercantile Exchange expired worthless. The put seller has the advantage of generating income on a worthless expired contract and also an opportunity to buy the shares at an attractive price if the buyer exercised its right. Selling weekly puts enable the sellers to trade four times a month and generate higher annualized returns on investment.

When to sell weekly puts?

Following points to be considered while selling weekly puts

  1. View
    If the seller has a bullish or neutral view on the stock of an underlying, he can sell put options with an attractive premium amount.
  2. Trend
    The seller should sell the put option when the trend is range-bound or there is a slow movement of the stock. It ensures the stock will move in a particular range.
  3. Volatility
    Selling weekly puts can be beneficial when the volatility of stock of an underlying asset is lower to avoid huge losses if the stock moves in the opposite direction.
  4. Margin
    There should be a sufficient margin in the account to place a selling order. The capital requirement varies from broker to broker.
  5. Premium
    Premium amount should be attractive to cover the cost of the transaction and generate significant returns on the option.

Advantages of selling weekly puts

  1. Time decay
    Time decay accelerates as an option’s time to expiration draws closer since there’s less time to realize a profit from the trade. The put seller gets a regular premium amount on every expired day. We calculate the time factor by options greek called theta. Selling weekly puts allows the traders to take advantage of a faster rate of premium declination.Put options for income
  2. Odds in favor
    There is a greater possibility that the contract expires worthless on the expiration day and the seller generates income on premium. Maximum times the seller gets the benefit of the likelihood of the outcome.
    Let us suppose the stock of the XYZ company is traded at $50 and has an IV of 20%. The expected range of the stock’s movement is $40- $60(20% 0f $50), about 68% of times the stock will move in this range.Put options for income
  3. Trading Edge
    Generally, the option pricing is overstated in the long term because IV(implied volatility) usually overstates the expected move of an underlying stock, ETF, Index. IV is derived from options pricing. It is a future projection of the movement of the stock. Market overestimates the implied volatility than the realized volatility. In the DIA(SPDR Dow Jones Industrial Average) study on historical IV(HIV) and realized IV it was found that there was a 6.25% difference in HIV and actual IV. On average, the DIA expected the market to have a slightly more volatile environment than has been realized over the last 13 years. As implied volatility increases(vega) an options price will increase to compensate for the higher probability of being ITM at expiry. Because of the overestimation of implied volatility, the cost of options increases, and the buyer pays more than the actual risk undertaken by the seller. The seller gets edged on the transaction and receives a higher premium than the actual risk associated with the stock.Put options for income
  4. Buying a stock at an attractive price
    The seller gets a chance to buy the stock of the company at an attractive price if the buyer exercises its right and sell the underlying stock at the strike price. The buyer exercises its right if the spot price is lower than the strike price. The put seller has an obligation to buy the shares at the strike price higher than the market price. Though the seller suffers the loss to buy at the higher price he receives the shares at the attractive price. He can hold the shares and sell them at a higher price in the future. Stocks of blue-chip companies having the potential to move up in the future are recommended to hold.

Though option sellers have unlimited risk and limited profit opportunities on the contracts, they can hedge their position by combining other strategies and can limit their risk. Sellers can professionally manage their risk with cash secured puts, bull put spreads, covered calls, calendar spreads, etc. Selling naked puts increase the potential risk of the portfolio so, it is advisable to carefully study the market and combine various strategies to limit the potential risk.

Built your options strategies with marketxls templates and calculate your risk and reward ratio with ease.


None of the content published on marketxls.com constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The author is not offering any professional advice of any kind. The reader should consult a professional financial advisor to determine their suitability for any strategies discussed herein. The article is written for helping users collect the required information from various sources deemed to be an authority in their content. The trademarks if any are the property of their owners and no representations are made.


Learn more about options trading here

Learn more about options  and various strategies here

Interested in building, analyzing and managing Portfolios in Excel?
Download our Free Portfolio Template
Download Option Templates
Stock screens
Public saved screens

Top 100 Gainers Today

Top 100 losers Today

Call: 1-877-778-8358
Ankur Mohan MarketXLS
I am so happy you are here. My name is Ankur and I am the founder/CEO of MarketXLS. Over the past four years, I have helped more than 2500 customers to implement their own investment research strategies and monitoring systems in Excel.
Invest with confidence with billions of data points and thousands of pre-built functions and templates.
Get started today
Search for a stock

Get Access to 1 Billion Usable Market data points IN YOUR EXCEL SHEETS WITH EASY TO USE EXCEL FUNCTIONS

Get started today

Top MarketXLS Rank stocks

NACCO Industries Inc. logo

NACCO Industries Inc.

Optionable: No
Market Cap: 367 M
Industry: Coal
52 week range    
Cintas Corporation logo

Cintas Corporation

Optionable: Yes
Market Cap: 39,137 M
Industry: Business Services
52 week range    
Hibbett Sports Inc. logo

Hibbett Sports Inc.

Optionable: Yes
Market Cap: 677 M
Industry: Specialty Retail
52 week range    
EOG Resources Inc. logo

EOG Resources Inc.

Optionable: Yes
Market Cap: 61,798 M
Industry: Oil & Gas E&P
52 week range    
Darden Restaurants Inc. logo

Darden Restaurants Inc.

Optionable: Yes
Market Cap: 16,207 M
Industry: Restaurants
52 week range    
Dick's Sporting Goods Inc logo

Dick's Sporting Goods Inc

Optionable: Yes
Market Cap: 8,757 M
Industry: Specialty Retail
52 week range    
Waste Connections Inc. logo

Waste Connections Inc.

Optionable: Yes
Market Cap: 35,409 M
Industry: Waste Management
52 week range    
STORE Capital Corporation logo

STORE Capital Corporation

Optionable: Yes
Market Cap: 8,868 M
Industry: REIT - Diversified
52 week range    
Buckle Inc. (The) logo

Buckle Inc. (The)

Optionable: Yes
Market Cap: 1,720 M
Industry: Apparel Stores
52 week range    
ICF International Inc. logo

ICF International Inc.

Optionable: Yes
Market Cap: 1,994 M
Industry: Business Services
52 week range    

More Features