In 2023, one particular options strategy worked very well for me and that is the SOP Strategy, which stands for Selling OTM PUT. It allows me to gain $29.4k profits and has an extremely high success rate of 96.4%
Read more here: How This Options Strategy Help Me Gain $29.4K Profits & 96.4% Success Rate In 2023?
In 2024, after I converted many of failed SELL CALL contracts (especially Nvidia) to SELL PUT contracts, I eventually ran out of liquidity to SELL PUT as my SELL PUT was not cash secured but on margins.
So, I tried out a new options strategy called BULL CALL Spread, otherwise known as Debit CALL Spread, which allows me to continue my bullish strategies without having a large capital or maintenance margin to open up a sell PUT.
Read more: Trying Out A New Options Strategy | If Nvidia Closes Above USD820 On 26 April 24, I Earn USD3.2k
The BULL PUT Spread is somewhat similar to the BULL CALL Spread that I use. The only difference is that the options contract owner now receives a credit instead of paying a premium. I am using BULL PUT Spread to compare with Cash Secured PUT as both strategies will allow the options contract initiator to receive credits instead of paying a premium upfront.
Read more: How Does Bull PUT Spread Work? | PUT Credit Spread Explained For Newbies (Part 2 of 4)
Comparing Cash Secured PUT (CSP) vs. BULL PUT Spread (BPS)
The below table compares the 2 options strategies at a glance.
| Pro | Con | How To Fix A Broken Trade? | |
| Cash Secured PUT | Worst case scenario is to own 100 shares at strike price (discounted from premium collected). | Requires a capital to purchase 100 shares of underlying stock if exercised. | Can roll to a later date so buy more time, possibly premium, so that contract expires worthless. |
| BULL PUT Spread | Does not requires a huge capital to set up the trade. | Total loss of capital if share price expires below lower strike price. | Can roll to later date but strike prices will be further increased. |
The thing I like about selling cash secured PUT is that in the worst case that the trade does not go your way, you do not lose your capital entirely as you will purchase the shares as the contract gets exercised on expiration date. With 100 shares owned of the underlying stock, you can sell Covered CALL on the shares and earn some premium from selling Covered CALL. The intent, of course, is to not get assigned, so that you can keep earning premium and your capital is not locked up in shares.
This is especially important as the share price may start to plunge after you get exercised. Take for example, I sold a CSP on Pinterest back in 2021 when it was trading around USD70 ~ 80, but the share price plunged and never truly recovered over the next few years.
The same goes for my other holding, Nio, whose share price has never recovered from their highs in 2021. Therefore, do pick stable and fundamentally sound companies if you want to sell CSP on and not be tempted by the juicy premium offered when you sell PUT on the high volatility companies.
To sell a Cash Secured PUT contract, you would need to have the capital to buy 100 shares of the underlying stock at the agreed strike price and for some companies with higher share price, you will need to prepare a huge capital. Another options strategy that offers a higher return with a lower capital is the BULL PUT Spread strategy.
Let’s use the below example to illustrate.
Stock: Tesla
Strategy: Selling Cash Secured PUT
Expiration Date: 8 Nov 2024
Days to Expiration: 41 days
Strike Price: USD220
Cash required: USD22,000
Premium Collected: USD7.83
Yield/ Returns: 7.83/ (220-7.83) = 3.69%
Stock: Tesla
Strategy: Buying BULL PUT Spread
Expiration Date: 8 Nov 2024
Days to Expiration: 41 days
Strike Price: USD220 & USD215
Cash required: USD500 (Difference in strike prices x 100)
Premium Collected: USD7.83 – USD6.58 = 0.8
Yield/ Returns: 0.8/ (5-0.8) = 19%
If the options contract owner is very confident that the share price of Tesla would eventually expire above the strike price of USD220 on expiration date, then the BULL PUT Spread strategy will give a high percentage yield.
The risk is that if Tesla’s share price plunges to below USD215 (lower strike price of the spread), the options contract owner will lose all his capital as he now need to buy the shares at USD220 and sell it away at USD215, incurring a loss of USD500 (minus the premium collected at USD80). Thus, his max loss in this contract, should it failed, is USD420.
Both CSP and BPS can be rectified by rolling the expiration to a later date but the strike price may have to be increased in order not to have any difference in the premium collected between the old and new contract.
Concluding Thoughts
The above 2 options strategies are bullish and relatively easy to execute. As each comes with their respective pros and cons, please do your due diligence to ensure you are aware of the risk involved. If you should need any clarification, feel free to contact me so that I can clarify the concepts with you. I wish you all the best in your trades.
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