 Hey everybody, Lee Lowell here, smartoptionseller.com. How's everyone doing today? Today is Sunday, November 8th, 2020. Hey listen, if you're interested in selling put options or wanting to learn how to sell put options, I've got a great free video for you today. I've got your five step checklist on how to sell put options. So we're gonna get right into it today on how we do that, because at the smart option seller, that's all we do in selling put options is a great option trading strategy. For those of you who may not know what selling put options are all about, basically it's a way to obligate yourself to buy any stock that you want at a much cheaper price than we're currently trades. So you're basically putting in a low ball bid on buying a stock, not at its current price, but a lot cheaper than its current price. And you know what? Someone will pay you to make that transaction. It's incredible. We love selling put options. And I'm going to show you how to do that in five easy steps. So let's go right to our checklist, our five step checklist on how to sell put options. Number one, if you were going to sell a put option, the first step is you have to pick a stock that you wanna buy, right? It's all about buying stock. So you have to pick a stock that you wanna buy. And your second step is you have to pick the price where you wanna buy that stock. So let's just say you found a stock that you wanna buy, but you don't wanna buy it at its current price. You wanna buy it at a price cheaper than that. So you have to pick the price where you're willing to step in and buy that stock. Third step, you have to pick the expiration date. All options have an expiration date. So you have to pick the length of the trade. And I'll show you how you do that. We'll look at an example. And after you've picked the stock, you've picked the price that you wanna buy it for, and you've picked the expiration date. Now you just sell that put option and collect the cash. And that is actually called the premium. You sell the option, it's called, you're selling it and you collect the premium. That's the option price, the premium. Step number five, you just sit back and watch, wait and see what happens until the expiration date. So it's very, very simple. Selling put options is a five-step simple process. Now let's just go over once again what you're actually doing when you're selling a put option. And this is an incredible option trading strategy. Number one, you're interested in buying a stock, but you don't wanna buy it at its current price. What can you do? Well, you sell a put option at the price where you're willing to buy the stock. And you pick the expiration date, and then when you sell that option, someone will give you money. It's incredible. So let's take a quick look at an example here on how we can sell a put option. Now we're gonna look at a stock chart of AMD, advanced micro devices, great stock. We love AMD at the smart option seller. We play it all the time. So on Friday, November 6th, 2020, AMD finished today at $85.88. So market had a pretty good end of the week. So AMD is at $85.88. And you're saying to yourself, you know what? I love AMD. I wanna buy some shares of AMD, but I don't wanna buy it at $85.88. I wanna buy it at a much cheaper price or cheaper price. I wanna get a good deal. I wanna buy it cheaper than $85.88. What can I do? Do I wanna buy it at $82 and $80, $75, $70? Where can I buy shares of AMD? Now, in the open market, you have to buy it at $85.88 if you wanna get your hands on some shares. But by selling a put option, what you could do is obligate yourself for some time in the future to buy the stock at a much cheaper price. And someone will pay you to make that transaction. So where do you decide, where's the price that you should buy the shares of stock? What's a good value? Well, if we were to sell some put options on AMD, we would look to the charts to figure out, where's a good support area? What's a value area that we deem worthy of potentially buying shares of AMD? Well, by looking at the charts, we have our 200-day moving average right here, which is really what we consider the granddaddy of moving averages on stock charts because everybody looks at the 200-day moving average, very important number. So in this case, the 200-day moving average is sitting right around $62.50 right here. So we would, at first blush, we would say, okay, if we're gonna sell a put option on AMD, where would we wanna buy the shares of AMD? Well, it would be right at this 200-day moving average. That's $62.50, which is a nice $23 discount. It's where AMD is currently traded. So you'd say to yourself, well, how could I buy AMD at $62.50 when it's currently trading at $85? Well, you can't do that in the open market, but what you can do is put in a future obligation to do that sometime in the future. And for that future obligation, someone will pay you money today. So in our case, in this example, $62.50 would be the area where we would be comfortable buying AMD. It's a nice $23 discount. It's over a 20% cushion between the current price of AMD and here, right? That's almost a 30% cushion, right? That's almost 30%. That'd be a big drop. So anyway, so we've decided, hey, we wanna buy some shares of AMD. We don't wanna buy at its current price. Let's put in a lowball bid to potentially buy these shares sometime in the future. And $62.50 is our potential buy point. Now, remember, when you sell these put options, someone is going to pay you money, but you have to figure out, well, how much money can someone pay me? Well, now that your next step in the process is you have to go to the option chain and take a look at, you have to take a look at how much someone's willing to pay you, right? So we go to the option chain and we look at, we've got call options on the left, put options on the right. So we're only gonna concentrate on the right side of the option chain with the put options. And here are the strike prices. Here's all the levels where you could potentially buy, or at least contract yourself out to potentially buy shares of AMD in the future. So we're concentrating on the $62.50 level right here. And here's the put option prices. And all option prices, just like stocks, have a bid and ask market. And in this case, on Friday, November 6th, the 62.50 put went out at 45 cent bid at 69 cent offer. So whenever you trade an option contract, just as you would trade a stock, you wanna do something right in the middle, right in between the bid nests. You don't wanna sell right at the bid price. You don't wanna buy right at the ask price. You wanna contract yourself somewhere in the middle. So in this case, let's just say we sell that put option for 55 cents per contract. That's what you can do. And in the options world, every option contract consists of 100 shares of stock. It's called the 100 multiplier, 100 share multiplier. So you always have to multiply these prices you see here by 100, by 100. So if we were to sell this option for 55 cents per contract, you multiply that by 100, that's 55 actual dollars. So if you sell that put option, someone will give you $55 today for your future obligation to buy the shares of AMD at 62 and a half dollars. Now let's go back to the chart. So you might be thinking to yourself, is someone's actually gonna give me $55 today for the opportunity to buy AMD at 62 dollars and 50 cents? Yes, that's absolutely right. So someone's paying you to buy AMD at a discount somewhere in the future. And if we go back to the option chain, we're looking at the January 15th, 2021 options in this case, it's 68 days in the future. Now you could look at any expiration date you want. If you go out to March, the more time you give, the more money you get. So it depends on how long you wanna hold the trade for. Now let's look at the 62.50 puts here. That's $1.30 bid at $2.14 offer. Now, since the market is closed, these bid ask prices are very, very wide. When the market opens, a stock like AMD has a much tighter bid ask market. But in this case, let's just say, it's about maybe $1.70 per contract. So you'd get $170 by selling this put option versus $55 if you sold the January put option. So you have to choose the expiration date that jives with what you wanna do. In this case, we're choosing January, it's only 68 days in the future. So for the next 68 days, what you're doing is putting out an obligation to potentially buy shares of AMD for $62.50. So for the next 68 days, you're on the hook to buy the shares and someone will pay you $55. So let's go back to our document here, our cheat sheet. So if you go through the five steps, you pick the stock, you've sold the option, now you just sit back and wait. What happens on expiration date in January? Well, there's only two things that can happen. There's only two scenarios that can happen in January, 2021. And that would be if AMD stock price is above the strike price of $62.50. If AMD is still at $85, that means the option will expire, it will expire worthless, it will have no value, it will just disappear from your account. And two things will happen at that point. Number one, you won't get to buy the shares of AMD, it's $62.50, that's life. You just don't get to buy the shares because AMD is still trading at $85. But you get to keep the $55 that you received on day one of the trade, of the transaction. So you walk away with $55 in your pocket, and you know what? You can just repeat the process, do the trade again. The second situation is that if AMD actually does finish below your strike price of $62.50, that would have meant AMD fell from $85 all the way down to $62.50 in the timeframe that the trade was active. Now, if that happens, then guess what? You get to buy your shares of AMD for $62.50. And it's called being assigned the shares. So if that happens, if AMD stock is below $62.50, your broker will assign you the shares and you have to pay for them in full at that point in time. And that would be basically mission accomplished. You got to buy your shares at a $23 discount, almost a 30% discount from where AMD was trading on day one. And that's great, that's what you wanted. So at that point, you will have to pay for the shares in full, and let's go down to this next step here. And I should say, and also with that, if you have to buy the shares, you still get to keep the $55 that you received on day one, so you still get to keep that money. So you get to buy the shares and you get to keep the money, it's a great thing. So how do you manage a trade between now and January? Well, you're just sitting there waiting to see what happens. Well, number one, you will be assessed a margin requirement by your broker. Well, what's a margin requirement? A margin requirement is just an amount of your free cash funds that have to be held aside while the trade is active. Now, your broker's not going to just let you sell put options at random willy-nilly just because you want to sell put options and collect this income. Your broker needs to make sure you have some skin in the game. And by that, I mean, they're gonna make sure that some of your money is held aside while the trade is active. Well, how much money, how does that work? Well, the margin requirement is typically 10 to 20% of whatever the full cost of the stock would be if you had to pay for it in full. So in this case, let's just look at the example. The AMD January 6250 put option, if you had to buy 100 shares at that price, it would be $6,250, right? 100 shares times $62.50 is $6,250. Now, you don't have to keep all that $6,250 on hold at all times. The margin requirement is typically about 10 to 20% of that amount. Okay, if you look up here, margin requirement is roughly 10 to 20% of the full stock cost. And that depends on your broker. It depends on who your broker is. You can ask them, hey, what's the margin requirement if I sell a put option? And it's typically somewhere between 10 to 20%. So what would that be? That would be roughly $625 to $1,250. That's the 10 to 20% of this number right here. So while the trade is active between now and January, your broker's gonna have you hold aside. You can't use this money. You're gonna have to hold aside $625 to $1,250. And that number can fluctuate higher or lower depending on which way the stock moves between now and January. So that's all you're doing, right? Between now and January, you're just waiting to see where AMD trades. It's currently at $85 and change. It will it fall down to $6250 before expiration? That's the goal here, it's to see whether it will fall that far. And I told you there's two things that could happen. AMD's either gonna be above $6250 or below it. And that'll determine whether you get to buy the shares or not. Now, let's just say, okay, well, you're halfway through the trade. You're like, you know what? I'm done holding this trade. I don't wanna hold this trading more. The good thing about options that is that you don't have to hold until expiration. You could unwind the trade at any time you want, which means you'll just have to buy that put option back. Remember, you sold that put option. If you wanna get out of the trade, you have to buy that same exact put option back. And that put option will have a price at that point in time. And that price will either be higher or lower than the $0.55 that you originally sold it for. So let's just say the option's worth $0.20 when you say, yeah, I wanna buy this back. Well, if you sold it at $0.55, now you could buy it back at $0.20. You'd lock in a $0.35 per contract gain. That'd be $0.35 you lock in. So you make some money. Now, if you buy the option back, the trade is done over what you have no more obligation. But let's just say the option contract's trading for $0.85 when you think you wanna get out of the trade. Well, now you're looking at a potential $0.30 loss or $30 loss because you have to buy that option back at more expensive price than what you originally sold it for. So that's up to you. You have to decide what you want to do. You either hold it until expiration and see where AMD stock ends up or you can get out at any time. And if you get out, you may end up getting out for either a profit or loss. So that's up to you to decide what you wanna do. So let's go back to the chart here. AMD, it's currently at $85.88. You're waiting to see if it's going to fall down to $0.62.50. If it does, you end up buying the shares, great, you're happy, and then you just wait to see if the stock goes back up over time. If AMD doesn't fall that far, then you just keep the money that you received on day one, which is $55 in this case. And you know what? Now you turn around and sell another put option for another couple of months in the future and you collect another batch of upfront income. So theoretically, you can just keep rolling and rolling and doing this trade over and over again. And if the stock never falls to your strike price, you never get to buy the stock, but at least you're getting compensated with money every couple of months. You're taking the cash. And you can decide how many contracts you wanna sell if you're interested in potentially buying 500 shares of AMD, then you can sell five put option contracts and you can collect 55 cents times five. So you're making money depending on what's your risk threshold, how many shares you wanna potentially buy. So selling put options is a great way to get this current income and to obligate yourself to potentially buy a stock at a cheaper price. Now you have to choose the level where you wanna buy that stock potentially and you have to choose the expiration date. So take a look at all the expiration dates, see how much money you can collect and then you decide which one you wanna sell. So it's a very easy process, five step process, easy, easy, easy. And let's just go back so you can see and you have this on the video, you can always look at this. So it's all about, you know, collecting the income and then potentially buying a stock at a later point in time. You're putting in a low ball bid to buy a stock that you want. Remember, you wanna sell put options on stocks that you want to buy. You don't wanna sell put options on just any random stocks. That is what we call a no-no. You don't wanna do that because you may end up having to buy the stock and it might not be a stock you wanna buy. So, you know, just be careful. Make sure you stick to stocks that you want to buy quality stocks and potentially hold for the long term. All right, so there you go. That's your five step process. I hope you got this. I hope you understand what it's all about and, you know, give it a try. It's a great way to, you know, make yourself some current income and potentially buy some great stocks at cheap prices. So what else can we do today? Well, as part of our videos, we like to take a look at the charts. We call this our Saturday synopsis. And actually today, so it's a Sunday. It's our Sunday version of the Saturday synopsis. We'd like to take a look at some charts, see what happened over the past week in the market and see what may happen moving forward. We'd like to take a look at some individual stocks. I can show you some, you know, chart patterns, things that I'm seeing. And, you know, it's part of smart option seller. We look for these patterns so we can sell put options and collect the money, potentially buy these shares at our buy price. So let's go right into it. We always look at the general market first. We always look at the SPY and which is the exchange traded fund for the S&P 500. We want to see the overall view of the market and the SPY is what gives it to us. So what happened this week? Well, you know, as we know, and I've been talking about this each week, we had the US presidential election on Tuesday last week, November 3rd. And finally, yesterday, Saturday, November 7th, it was decided it was called that Joe Biden will be the next US president. So, you know, this is big, this is big here. And we were looking at the market last week. Last, you know, Wednesday, Thursday, Friday, the market had a huge, huge jump. Just skyrocketed higher. And I think the market was predicting that, you know, Joe Biden was going to win as the week moved on. It looked clearer that Joe Biden was going to become the next president. But at the same time, US Congress was still going to be divided between Democrats and Republicans. So that will sort of lead to some gridlock down the road, meaning not a lot of legislation or new laws will be passed to reign in Wall Street. And Wall Street likes that. They like the gridlock because sort of the status quo, things aren't really going to change that much. So Wall Street on Wednesday, Thursday, Friday last week had a huge jump in the market. So let's take a look at the S&P 500. So at the end of last week, we were down here. And I had shown the support line right at the 320 level or the 3,200 level on the S&P index itself, that it looked like the market was probably going to test the, you know, the 320 level. And this was the end of last week, Friday. We closed down here on the lows. Let's stretch this out a little. So this bar right here was, looks like we thought it may test the 3,200 or the 320 level. But as the week progressed, here's our move all last week. And I had been talking about the, we needed the market to get back above the 20 day and 50 day moving averages. Those are very important as well. And, you know, Wednesday, Thursday and Friday, these three days last week, Wednesday, Thursday, Friday, each bar is one day's worth of trading, blasted higher and took us back above the 20 day and 50 day moving averages. So that's a really, really great thing. Now, today is Sunday, November 8th. The futures market opens up at 6 p.m. Eastern time. So I'm very eager to see what's going to happen tonight at 6 p.m. Eastern when the futures markets open up. I have to believe, and this is just my guess here, is that the market is just gonna go massively higher. Now that the election has basically been called, we know who the winner is. The market doesn't have that uncertainty hanging over it anymore. And that is a good thing. And that's usually very, very bullish. So I'm thinking tonight, the market is just gonna jump higher and just start on the next leg of its move higher. Now, I wanna show you these price patterns. So what's happening here on the chart is what we're seeing is the W pattern, the W pattern. And let me show you this. This could be a very bullish type of pattern. And I'm just gonna mark this out and then I will, I'm gonna mark this out and I'll show you why it looks like a W. Let me edit this a little bit so you can see what I'm looking at. As I said, sometimes chart analysis, it's a little manual labor involved. So I have to go through a couple steps here to show you what the pattern actually looks like. So give me a second while I go through this. Change color, change the width of the line so you can really see the W pattern. Last step here. All right, so now there we go. Now you can see the W pattern really good and to know where the pattern will blow out or blow above. So basically you want the, here's the resistance line. So you have to know where the resistance is. So this is, the W pattern could be very bullish if it gets above the resistance line here. Okay, and let me go back to another chart. I'd show this before Intel had been making a W pattern before. This was a few weeks ago, made the W pattern. Here is the line in the standard resistance line. And you can see that Intel blasted through it. Once it blasts through it, it keeps going. Unfortunately for Intel, it had bad earnings come out and it just dropped it well below after that. It's unfortunate, but the pattern itself worked. Once it went through the resistance, it popped higher. So let's go back to the S&P 500. So I'm thinking, you know, if the S&P opens tonight, futures market and all day tomorrow, if it opens above it, it's just gonna continue on higher. So that's something that I'm looking for. Let's take a look at the NASDAQ. We'd like to look at all the indexes itself. NASDAQ, same thing. I'm not gonna draw it out, but you can see the W pattern right here. Okay, same thing. And here's the resistance line. So if the NASDAQ opens up tonight and tomorrow in the next couple of days above this resistance line, it's basically off to the races. So I'm looking at a very bullish environment here for the stock market. You know, Joe Biden has been declared the winner. Basically, we'll have a divided Congress which should still lead to somewhat of a gridlock. And so that is basically the status quo for Wall Street. Wall Street doesn't like big changes. So that could be very bullish. And let's take a look at the Dow Jones industrials. Look at the last of the indexes. Same thing. You can sort of see a W pattern coming on here. The end of last week, we talked about how the Dow bounce right on the 200-day moving average. There's the line right here. So it acted as major support and it just bounced. Look at that nice bounce right off the 200-day moving average. So this is very constructive for the market. I like what I'm seeing here and I think the next leg of this bullish move is going to happen. Especially since we're in a very bullish seasonal period. January through, I'm sorry, November through January is a very bullish three-month period. So we've got that on our side as well. Let's take a look at some individual stocks, see what happened there as well. We had looked at AMD. Let's bring the AMD up one more time. AMD, I had given the line of support right around the $74. I had put this line on the chart a couple of weeks ago, I think. And you can see that bounce, bounce, bounce at $74 every time. And sort of making a W pattern. Not so much, not as clear as on the other charts, but you've got some probably resistance here. But AMD just looks nice and strong. So I think it's going to keep going higher as well. Let's take a look at Apple. I like to look at Apple. Apple's been sort of meandering around. Come downs, come up. It's actually above the 20-day and 50-day moving averages, which is good. I'm bullish on Apple long-term. This is my long-term view. And I think now that it's gotten above the 20-day and 50-day moving average, and if we get some good movement tomorrow, I think Apple's going to start moving back up to try to take out its all-time highs. Amazon had a pretty good move at the end of last week as well. Here's where it ended last week, wasn't looking so good, then blasted higher. It's trading above the moving averages, which we like to see sort of a W pattern as well. I think a lot of these charts are going to be making this W pattern. And they're going to try to take out the all-time highs. What else do we see? Google, we look at as well. These are all these NASDAQ stocks that were major drivers from the bottom of the coronavirus. Look at Google. Once it had bounced off this 20-day moving average, back in September, it's just been off to the races. Also hit another all-time high again on Thursday last week. So Google, very strong. What else do we see? Tesla, we like to look at as well. Tesla, it's kind of been meandering around. We can also make the case that it's coiling into its triangle pattern. Let me show you what I'm seeing. You can sort of draw a triangle pattern. You connect the highs, you connect the recent lows, and now you've got the building of a triangle pattern here where the range just gets a little bit tighter and tighter and tighter. And once it reaches the apex of the triangle, it's going to blast off either upwards or downwards. I have to believe Tesla always has some bullish momentum. It's probably going to pop to the upside relatively soon. So that's some of the things I'm seeing. What other charts do we like to look at? Facebook is another driver. Facebook had a pretty good week. Had a good move Wednesday, Thursday, Friday, just like all the other stocks. Here's all-time highs for Facebook. So that's some of the things I'm seeing out in the market. I'm bullish here. I think this thing's going to go. I'm very interested in seeing what happens tonight in the futures market. So that's it. That's it for your Sunday version of the Saturday synopsis. Let's go back to the SPY one more time just so we're all on the same page here. See what we're seeing. We've got the W pattern. If it opens above the resistance line and the next couple of days stays above the resistance line, it's off to the races. We're on the next leg of this bull move. So be careful out there. This is just my opinion. And let's look at the VIX because I forgot to look at the VIX. We'd like to do that as well. The volatility indicator, VIX had a big down week. That meant that the market is going up, VIX goes down. So volatility is coming down again, getting cheap here. So I think that the, we still have the coronavirus cases going up around the world. That's unfortunate. We have these third quarter earnings still coming out. But I think the market itself is always looking ahead to brighter days. We've got vaccines that should be coming out relatively soon that could be put out around the world. The market, I think at this point with the US presidential election being over, we know who won, the market is happy. So I'm just, I'm feeling bullish here. That's just my take. It's not any kind of investment advice, but that's what I'm seeing on the charts. And I think that the charts are very telling. All right, so that'll do it here. Those are the charts we'd like to look at. Let me just show you one other thing here. I wanted to bring this up when we were looking at the AMD trade. I forgot to bring this up. This is a probability calculator. We'd like to see what are the chances of, the stock moving from point A to point B. And here's the AMD trade. So if we had sold that $6250 put option, what are the chances of AMD dropping from $85, 88 cents all the way down to $6250 in the next 68 days. And I'm sorry, I didn't bring this up before. But basically what the probability calculator's telling us is that there's only a 5% chance that AMD will drop the $23 in that time a lot. So if you're selling put options and you wanna know what are the chances that you'll get to buy AMD for $62.50, well, the probability calculator can tell you what that is. It's not a guarantee, but it's giving you a pretty good idea of the chance. So on here, the flip side is that it's about a 95% chance that AMD will stay above the strike price of $62.50. So you have your inputs up here. You put your strike price here and then you look at this box or this box. And it'll tell you what are the chances of AMD falling down to your strike price in the time allotted. Now you could change the stock price, change the expiration date, the future volatility number that you have to get from another source. And I wanna show you that as well. And that is on the iVolatility website. Let me just bring that up so you can see. You go to iVolatility.com and you pull up the volatility chart for AMD. Now this is a volatility chart. The current volatility levels around 42, 43%. If you've got two different types of volatility, you've got historical and implied and you see where they both currently are right around 42%. So we go back to the calculator and I put in 45%. I just use a little bit of higher number. And if I had changed this to 42%, you'll see how the numbers at the bottom change, click go. So now there's only a 3.93, almost 4% chance that AMD will fall down. Conversely, there's a 96% chance that AMD is going to stay above $62.50. So there's not a high chance that you'll get to buy the shares at 62.50 because AMD is not gonna drop $23 in that amount of time. So it's very important. Take a look at the probability calculators. Lastly, you go to our website. If you wanna learn more about how to sell put options other than watching this video, go for any of you newcomers, download our put selling basics free guide. Tells you all about selling put options. You can click on this link. It'll take you to a different page or you can just put in your name and email address right here on our homepage. Lastly, we do sell put options in our newsletter. That's what we do. We have our newsletters. You click on the services tab here. Our smart options seller newsletter is all about selling put options. That's what we do here. We have our vertical spread trader newsletter. We sell put option credit spreads. It's just another way of taking advantage of the market. And lastly, our service of one-on-one coaching if you want some help, getting up to speed, getting your options trading game to the next level. Okay, well that's it for today. That's it for me. As you watch this YouTube video, don't forget to hit the red subscribe button in the bottom right-hand corner. Also, give me a thumbs up. Leave a comment if you wish. Send me a question, write a question below if you want. I'm always here to help. I'm always here to answer. Okay, so that'll do it for me. That is it. I hope everyone has a great weekend and I will see you all next week. This is Lee Lowell, signing off.