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Selling puts unnecessarily scares a lot of options traders.

If done correctly, selling cash secured or slightly levered puts is one of the most lucrative and simplest of options trading strategies.

A thread on Cash Secured Put selling.

The value of puts is derived from what the marketplace assumes is downside risk of any underlying.

ATM puts make up their premium from in part the equity premium and partly the volatility premium.

For those underlyings where and when the volatility premium is a positive number, selling these puts can be an enriching endeavour.

The equity premium is simply the premium you get paid for holding the stock for long periods of time.

Puts marry these together.

I'll leave it to you to go readup more on a simple cash secured PUT selling methodology that the CBOE runs under the ticker, $PUT - the Cboe S&P 500 PutWrite Index.


This strategy can be replicated on any underlying where the volatility premium is positive.

It is best run on options of a diversified stock index where there is a good likelihood of the option implied volatility being higher than realized volatility.

That leaves us #options traders in India with just one underlying, the $Nifty.

No, the $BankNifty doesn't qualify!

I said, well diversified stock index where the implied vol stays above realized vol.

So back to the $Nifty.

This is what the long term IV and HV looks like.

IV tends to stay above HV for extended periods of time.

Replicating the $PUT strategy on the $Nifty with no leverage i.e. fully cash secured would need you to deploy ~ ₹7,95,000 lets say ₹8 lakhs per lot.

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