How To Sell Puts; Two Very Simple But Effective Strategies

How to Sell Puts: Two Nonlinear Approaches to Income and Ownership

March 31, 2024

Sometimes, the best trades aren’t about prediction—they’re about positioning. Selling puts isn’t just a strategy; it’s a philosophical stance. It blends patience with precision, control with surrender. Done well, it generates income. Sometimes, it grants ownership. And if you read between the lines, it tells you what the market really fears.

Below are two distinct lenses—parallel ways of engaging with risk. Each has its own gravity.

Strategy 1: The Gravity Well — Waiting for the Price to Come to You

This is the stillness-before-action approach. Less chase, more attract. You define your zone—then wait for the market to meet you there.

As Jim Bittman put it, “The key to successful options trading is to have a plan and stick to it.” But plans here aren’t rigid; they’re like gravitational fields—set in space, patient, drawing opportunity inward.

Example: Apple (AAPL)
AAPL trades at $150. You want in at $140. Not because of a chart pattern. Because at that level, it feels like value—a convergence of price, sentiment, and story.

Wait for AAPL to near $140. Don’t flinch early.
Scan 2-3 month out puts.
Target the $140 strike—perhaps it’s offering a $5.00 premium.
Place a limit order to sell at $5.00 or better.

You’re paid $500 per contract for your patience. If assigned, your effective entry is $135—a price the market once rejected, now handed to you plus a volatility bonus.

This isn’t bargain-hunting. It’s fieldwork in probability space. You’re bending risk toward you.

Strategy 2: Time-Sculpting — Selling Volatility at the Edge of Now

This one’s kinetic. Less wait, more warp. It’s about selling not where price is, but where price might already be heading. You’re reaching forward, setting a price that reflects not just value, but time compression.

Lawrence McMillan once said, “Sometimes, the best trade is the one you can make now.” But “now” isn’t static—it’s a moving event horizon. This strategy taps that fluidity.

Example: Microsoft (MSFT)
MSFT trades at $300. You’d own it at $280. You don’t need to wait for the dip. Instead:

Find the $280 strike put, 2-3 months out. It trades at $8.00.
But you estimate that if MSFT were at $280, this same put would be worth ~$12.00 (use Black-Scholes or feel for it intuitively).
Place a limit order to sell at $12.00.

You’re not chasing. You’re shaping time. You receive $1,200 per contract if filled. And if assigned? You own MSFT at $268—cheaper than the crowd ever saw.

These aren’t just trading tactics. They’re frames for thinking. One is gravitational—attract and receive. The other is temporal—reach into a future moment and pull it back to now.

Both rely on contradiction: You want the stock, but hope you never get it. You risk owning shares, but you’re paid to wait. You act on logic, but surf emotion underneath.

And in that paradox, you find the edge—the place where real trades emerge.

Watch this video on YouTube

Selling Puts Through the Lens of Market Mood

Sentiment, Fear, and the Price of Risk

Put selling isn’t just about numbers—it’s about reading the emotional undercurrents of the market. It lives where psychology meets pricing, where crowd fear becomes a volatility spike, and where perceived risk inflates potential reward.

Behavioral economist Richard Thaler once observed: “The combination of loss aversion with mindless choosing implies that if an option is designated as the ‘default,’ it will attract a large market share.” Extend that logic—during fear-driven markets, the “default” choice becomes selling everything. That herd reflex creates asymmetry—and that’s where put sellers thrive.

Example: Harvesting Fear in March 2020

The COVID crash didn’t just trigger a selloff—it cracked open a collective emotional state. The VIX, that imperfect proxy for panic, spiked over 80. Markets don’t price rationally in those moments; they price based on imagined catastrophe.

SPY plunged from $340 to $240. That’s not just a 30% drop—it’s a psychological rupture. But for someone calm inside the chaos, it was also a window.

SPY at $240
$220 strike put, 2 months out, trading at $20
That’s $2,000 received per contract

If SPY stayed above $220: full premium kept.
If it dipped below and shares were assigned: your effective cost basis? $200. That’s 40% off pre-crash highs—driven not by fundamentals, but fear premium.

In moments like this, volatility isn’t just risk. It’s mispriced risk. And the only way to stand in it is to detach from the crowd’s emotional script.

Managing the Edge

Of course, risk doesn’t disappear because you understand it. Selling puts is still a dance with uncertainty—and discipline is the tether.

Options veteran Sheldon Natenberg cuts to the core: “The most important characteristic of a successful trader is discipline—the ability to consistently follow your trading rules.”

Here’s how to keep your footing:

Only sell puts on stocks you’d want to own. If you wouldn’t hold it on a drawdown, don’t rent its risk.
Capital cushion is non-negotiable. If you can’t cover assignment, you’re not trading—you’re gambling.
Diversify across narratives. Different sectors, different sentiment arcs. One story failing doesn’t collapse the whole book.
Use stop-losses with intent, not reflex. Protect yourself from tail events, but don’t let volatility noise shake you out of edge.

Selling puts is less about predicting the future and more about pricing the present. And when mass psychology distorts that pricing—when fear skews the curve—that’s your opening. But only if you’re willing to step into contradiction: rationality inside chaos, calm inside panic.

Watch this video on YouTube

Put Selling Meets the Chart: Where Price Patterns and Premiums Collide

Reading the Tape to Time the Trade

Sometimes, the edge isn’t in the premium—it’s in the timing. Put selling doesn’t exist in a vacuum. Overlaying it with technical analysis can turn a good idea into a well-timed one. You’re not just selling volatility—you’re selling into the crowd’s mistake.

John Bollinger once said: “Tags of the lower Bollinger Band are often good places to buy a stock.” Not because the band causes a reversal—but because it reflects emotional overshoot. Panic often lives in the lower band, and when traders run from it, that’s often when you should lean in.

Example: Amazon (AMZN) and the Bollinger Bounce

Picture AMZN trading at $3,000. The lower Bollinger Band is hovering at $2,800. Price dips, brushes that band, sentiment skews bearish—but you see the setup differently.

Wait for price to approach or pierce the lower band—signal of temporary exhaustion, not collapse.
Target puts at or below that level. Maybe the $2,750 strike, two months out.
Premiums are elevated due to the recent drop—you’re selling fear while price rests near a structural support.

If AMZN rebounds, the puts decay rapidly. If it lingers but doesn’t crash, you still win. And if it drops through? You’re potentially assigned shares at $2,750 minus premium—far below the crowd’s last moment of panic.

This isn’t just technical + options. It’s psychology wrapped in pattern, expressed as price.

Measuring Market Sentiment

You don’t just measure market sentiment—you feel it, map it, triangulate it from distortions. Sentiment isn’t always on the chart; sometimes, it’s between the headlines, in the premiums, in the hesitation. But there are still tools that catch the shadows.

Here’s how to tune in before selling puts:

1. The VIX (Volatility Index) — Fear’s Pulse

Think of the VIX like the market’s anxiety monitor. When it spikes, people are pricing in uncertainty, often overreacting. High VIX = rich premiums on puts.

Low VIX (<15): Complacency. Fewer opportunities unless you’re targeting specific mispricings.
High VIX (>25–30): Fear is selling at a discount. This is where the edge can appear—if you’ve got the nerve.

But don’t read VIX in isolation. It’s not the fear itself—it’s the pricing of fear.

2. Put/Call Ratio — The Tilt of the Crowd

This measures how many puts are being bought vs calls. It’s a sentiment pendulum.

>1.0: More puts than calls = bearish sentiment. Possibly overdone.
<0.7: Greed or complacency may be peaking.

Look at it like a contrarian lens. Extreme readings often mean a turn is near—not guaranteed, but ripe for asymmetric bets.

3. Skew & IV Rank — The Shape of Uncertainty

Skew: Are out-of-the-money puts being bid up? That suggests protective fear. If you see high put skew, people are willing to pay for safety—makes selling puts more profitable.
Implied Volatility Rank (IVR): Where is the current implied volatility relative to its range over the past year? A high IVR (>50–60) tells you puts are juiced. That’s when selling gets interesting.

4. Price Action + News Cycle = Sentiment Texture

Gap downs on good news? That’s fear.
Reluctant rallies? That’s distrust.
Explosive rebounds after selloffs? Panic may have just peaked.

Overlay this with what’s flooding the headlines. Are the narratives loud, emotional, and repetitive? That’s mass sentiment crystallizing—often inaccurately.

5. Social Indicators & Flow Data (Optional but Telling)

Twitter/X sentiment, Reddit chatter, meme stock action—noisy but sometimes prescient.
Watch for option flow—are big players aggressively buying puts? Selling them? This hints at positioning underneath the surface.

So, how do you measure sentiment before selling puts?
You combine quantitative proxies (VIX, put/call, skew) with qualitative feel—tone, flow, narrative. You look for misalignment between fear and fundamentals. Because in that gap, premium blooms.

Closing the Loop: Synthesis Over Strategy

Put selling rewards the calm, the calculated, the contrarian. But when you layer it with technical structure, you sharpen your timing. And when you fold in sentiment? You’re not just selling risk—you’re selling the market’s misread of risk.

The game isn’t being right. It’s about being structurally sound when you’re wrong. That’s where Lawrence McMillan’s wisdom lands: “It’s not about being right all the time. It’s about being right more often than you’re wrong, and managing your risk when you are wrong.”

What that really means?