The options market has a reputation problem. Most people associate it with wallstreetbets — zero-day expiration, all-in YOLO plays, screenshots of accounts going from $10K to $500K or $0.
That's not how I use options. For me, options are insurance. And like all insurance, the goal is to never need it — but to have it when you do.
Selling Puts: Getting Paid to Wait
My most common options strategy: selling cash-secured puts on stocks I want to own at lower prices.
Here's how it works. Say a stock trades at $100. I'm willing to buy it at $85. Instead of placing a limit order and waiting, I sell a $85 put expiring in 60 days. I collect a premium — say $2.50 per share.
Two outcomes:
- Stock stays above $85 → I keep the $2.50. Annualized, that's often 15-25% return on reserved capital.
- Stock drops below $85 → I buy at $85 minus the $2.50 premium = effective entry at $82.50. Below where I wanted anyway.
Both outcomes are acceptable. That's the key. If you sell puts on stocks you don't want to own, you're gambling. If you sell puts on stocks you want to buy at a lower price, you're getting paid to wait.
Buying Puts: Portfolio Insurance
When VIX is low (below 15), put protection is cheap. I buy 5-10% out-of-the-money puts on the S&P 500 as portfolio insurance. Cost: roughly 0.5-1% of portfolio per quarter.
This is the part people hate. You're spending money on something you hope you'll never use. Like fire insurance — a waste of money until your house burns down.
In March 2020, my put protection paid for itself many times over. Not because I predicted COVID, but because I always have protection. It's a fixed cost of doing business.
Covered Calls: Generating Income on Holdings
For positions I want to hold long-term but where near-term upside is limited, I sell covered calls. This generates 1-3% per month in premium income while I wait for my thesis to play out.
The risk: the stock jumps above my call strike and I miss the upside. In practice, I set strikes high enough that I'm happy selling at that price anyway.
The Math
Most retail traders buy options hoping for a 10x return. The odds are against them — options expire worthless roughly 30-40% of the time.
I'm usually on the other side. Selling options with defined risk, collecting premium, and using time decay as an ally instead of an enemy.
It's not exciting. There are no screenshots to post. But over a decade, the compounding effect of consistent premium income is significant.
Options aren't inherently risky. Using them without understanding them is. The instrument is neutral — your strategy determines the outcome.