How do I profit from selling Puts on the way down?

I have been using a method a technical genius developed years ago that he intended to sell to hedge funds. I have been using it for 25 years now and have a lot of confidence in its ability to predict major reversals. So let's say hypothetically I am short a stock at $500 that I think may go down to $400 over a few months. I want to keep the stock but also want to sell puts beneath it every few days. This stock has options that trade every day. Is there a strategy similar to rolling options that would allow me to sell puts and make an extra few $100 a week?

 

- Trading for 25+ years
- Looking for $100 a week

Why posts that are full of shit always start with the sentence "I have been trading for 20+ years" ?

 

If you sell a put, that is a bullish position. You don't sell a put if you think the stock is going down. You sell a put if you think the stock is going up.

Unless you are trying to hedge your short stock position. But the best way to do that is to buy an OTM call.

 

He wants to collect some of that rich premium, obviously. It's a viable strategy if you're able to time the reversals.

Google "Options wheel strategy".

 

Thanks, that is what is was looking for. Other answers from failed traders are entertaining.

 

i can't even figure out a response..... lol

 

Stocks at 500, price target of 400,what strike would you sell??

You realize you are simply short a call at that point

 

How am I short a call if I am short the stock and sell a put beneath it?

 

How are you going to feel if the underlying drops 50 points in a week?

 

You need to study the concept of synthetic positions established with options.

The basic equation is C - P = S

If you are long a call and short a put at the same strike and the same expiration, that is functionally equivalent to long stock.

To understand this, you need to look at the profit and loss chart. It behaves just like holding the stock, and at expiration, if you take no action, you will in fact buy the stock at the strike price, in most cases, because 99.99% of the time, either the call will be exercised or the put will be assigned.

The equation obeys the basic rules of algebra, i.e., when you do something to one side of the equation, you need to do the same thing to the other side of the equation.

If you just manipulate that equation a bit using the standard rules of algebra, you get this:

- S - P = - C

If you are short the stock and short a put, that position is functionally equivalent to a short call.