Putting The Odds in Your Favor when selling options

When you are selling options you are already putting the odds in your favor, but there are ways that you can increase the probability of the options you sell expiring worthless and you profiting from it.

Here are some of the techniques you can use to increase the probability of you being right.

1.       Sell Out of the money.

When you sell out of the money options on a stock you are increasing your probabilities of making money because the stock does not need to go in your favor for you to make money.  When you sell out of the money option, the stock only needs to not move against you far enough.

2.       Sell With the Trend

If the stock is going down don’t sell puts.  When a stock is going down you have a higher probability of making money when you sell calls, when the stock is going up you have a greater chance of making money by selling puts.   Remember selling out of the money puts and calls on sideways trending stocks still technically qualifies as trading with the trend.

3.       Sell puts on fundamentally strong stocks

There is a lot of buying pressure for fundamentally strong stocks.  That reason alone should be a great reason for finding stocks with good fundamentals.   Even though fundamentals play a bigger role in long term investing they can affect the stock in the short term too.

4.       Sell options below support and above resistance.

When you sell options below key levels of support and above key level of resistance you are increasing your odds of success because stocks are likely to bounce off of those levels.   

When you sell options you are taking advantage of a high probability trading strategy, but your odds could increase even higher when you take all 4 of these factors into consideration. 

For more information about selling options visit http://www.stocks-simplified.com/option_selling.html