Buying 100 shares of stocks with market or limit orders? There’s a better way to profit and control your risk—it’s called selling puts. You get paid now to agree to buy a stock later at a price you like. Let’s break it down in today's blog!
Buying 100 Shares: The Old, Expensive Way
You want 100 shares of XYZ at $100 per share. It costs $10,000. Now you wait.
Stock goes up? Great, you make money.
Stock goes down? Ouch, you lose money.
Meanwhile, your capital is stuck. You can’t use it for anything else.
Selling Puts: The Smarter, Cheaper Way
Instead of buying outright, sell a put option. It’s a promise to buy 100 shares at a lower price (the "strike price"). Let’s say $95.
Here’s the kicker: You get paid a premium for making that promise—let’s say $200.
What Can Happen?
Stock stays above $95:
You keep the $200.
You don’t buy the shares.
Do it again. And again.
Stock drops below $95:
You buy the shares at $95.
But you already collected $200 in premium.
Your real cost? $93 per share. That beats $100!
Why Selling Puts Is Great:
Instant cash: The premium is yours right now.
Less money at risk: Instead of tying up $10,000, your broker typically requires only ~20% of the potential cost. In this example, it’s ~$1,900 to sell the put versus $10,000 to buy the stock.
You pick the price: You decide the strike price.
Win-Win: Either you get paid, or you buy the stock at a discount.
Time is on your side: Options lose value over time. This is called "theta decay," and you profit from it.
Let’s Compare
Scenario | Sell 1 Put ($95) | Buy 100 Shares ($100) |
Capital Used | ~$1,900 | $10,000 |
Premium (Income) | $200 | $0 |
Break-Even | $93 | $100 |
Stock Up? | Keep $200 | Make $500 |
Stock Down? | Buy at $93 | Lose $500 |
Dividends | None | Eligible |
Selling puts offers immediate income, lower capital requirements, and more control over your entry price.
When to Just Buy Shares
There are times when owning shares outright makes sense:
Dividends: You need to own shares to collect them.
Big Upside: If you think a stock will skyrocket, buying shares gives you unlimited upside.
No Assignments: Selling puts means you might have to buy the stock.
Want to Learn More? Join My FREE Mini-Course!
This Friday, 1/10/2025, I’m launching a FREE mini-course all about making your first options trade. I’ll break down strategies like selling puts step-by-step, show you how to pick the right trades, and teach you how to maximize your buying power.
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Happy trading good kids!
-$Maxwell
