Get Started

Here are the rules to get you started:
  1. Follow all the rules!
  2. Only trade options on stocks that you have qualified through fundamental analysis
  3. Only trade options on stocks or ETF’s that you are interested in potentially owning and willing to buy today because of the long-term fundamentals
  4. Sell out-of-the-money Cash-Secured Puts only
  5. Sell near term expiration (40 days or less to expiration).
  6. Never trade on margin only against actual cash that you have in your account
  7. Follow and know well the stocks and/or ETF’s you trade (I prefer to limit these to 20)
  8. Stocks and ETF’s with any of the following five characteristics will be disqualified from option trading:
    1. If the price is less than $20 or greater than $70 ($25-60 is preferred)
    2. If the Stock does not trade options
    3. If there are less than 100 open interest options available on the specific option month/strike price (500 is preferable)
    4. If the 3-4 month price trend of the stock/ETF is downward (lower highs, lower lows). Only up and sideways trends qualify.
    5. A company earnings report is scheduled to be released during the term when you would hold the Puts (i.e.; during the current option month).  This does not apply when trading ETF’s.
  9. Only sell puts on down market days when SP500 is down
  10. Only sell puts on stocks/ETF’s when all three of the following criterion are met:
    1. The Williams %R indicator for the stock or ETF is oversold >-60 the higher the better (above -80 is preferred)
    2. There is a 70% minimum success probability
    3. There is a 2% or more monthly profit in terms of premium per share vs. strike price (this one's flexible due to volatility and number of days left until expiration day)
  11. Set or monitor protective stops at 2 to 3 times the price of your option premium
  12. Remember rule #1

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