I sold an AMD PUT contract today, with the expiration date on 19 Nov 21 (18 days from now).
The IV is high at 39% and thus I collected a premium of 4.36% in just 18 days.
Read about why IV is important to options traders here:
What Is Implied Volatility (IV) And Why It Matters In Options Trading?
Today’s share price is at $123 and my strike price is $125, so I just need AMD to close $2 higher on expiration day (19 Nov), in order for me to earn the premium of 4.36% without having to buy any AMD shares.
However, if AMD’s share price closes below $125 on 19 Nov, I will be happy to own 100 shares of AMD at $119.55 ($125 minus premium of $5.45). Thereafter, I can sell covered calls on AMD to earn extra monthly income and continue to use the Wheel Strategy on AMD.
Related Articles:
How PUT Option Works
How Call Option Works
How Does The WHEEL Strategy Works?
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