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.
How PUT Option Works
How Call Option Works
How Does The WHEEL Strategy Works?