--- title: 'What is Selling Put Options? Explanation for Beginners' source: 'https://youtube.com/watch?v=LWhIO-OROG8' video_id: 'LWhIO-OROG8' date: 2026-08-04 duration_sec: 568 --- # What is Selling Put Options? Explanation for Beginners > Source: [What is Selling Put Options? Explanation for Beginners](https://youtube.com/watch?v=LWhIO-OROG8) ## Summary This video explains the concept of selling put options, a strategy for generating income or acquiring stocks at a desired price. The instructor uses practical examples with Ford and Tesla, demonstrates how to execute the trade on Interactive Brokers, and discusses the pros, cons, and market conditions suitable for this strategy. ### Key Points - **Definition of Selling a Put** [00:02] — Selling a put option commits you to buy the underlying asset at the strike price if the option buyer exercises it, with the risk of acquiring the asset in a depreciation scenario. - **Practical Example with Ford** [01:00] — Using Ford stock at $10.59, the instructor sets a strike price of $10.50 for a contract expiring October 18th, receiving a $21 premium. If the price stays above $10.50, he keeps the premium; if it drops, he buys the shares at $10.50. - **Executing on Interactive Brokers** [03:14] — To sell a put, search for the company, go to the options chain, choose the strike price (e.g., $10.50) and expiration date. The premium received depends on the strike price's proximity to the current price and the time to expiration. - **When to Sell Puts** [04:55] — Sell puts when you want to buy a stock at a lower price than current, or as a strategy in bull markets to generate returns on idle liquidity without being assigned. - **Pros and Cons** [06:29] — Pros: extra returns on liquidity, setting your purchase price while earning premiums. Cons: risk of abrupt market movements, e.g., if price drops sharply, you may buy at a higher price than market. - **Graphical Example with Tesla** [07:40] — Using Option Strat, a free website, the instructor sets a Tesla put sell at strike $245 for 11 days, receiving a $982.5 premium. If price stays above $245, keep premium; if between $245 and $238, buy shares with potential profit; below $238, losses. ### Conclusion Selling puts is a powerful strategy for income generation and acquiring stocks at desired prices, but it carries risks if the market moves sharply. The video provides a clear, beginner-friendly explanation with practical examples. ## Transcript about selling puts: the theory, practical examples, charts, pros and cons, and when in the market we should use them. What is a put option contract? Let's start with the technical phrase and I'll translate it for you in 4 seconds. I'm doing this simply so you can see that they're trying to make it difficult when it 's actually very easy. Selling a put option commits you to buy the underlying asset at the strike price if the option buyer decides to exercise it, with the risk of acquiring the asset in a depreciation scenario. We translated it, right? When you sell a put option, you are committing to buy a package of 100 shares if the share price falls below a certain point. And in exchange for signing that agreement, we're going to get understand, don't worry, because we're going to see it right now with a practical example. I'm going to use the Ford company example again. And for whatever reason, I think the shares are a little expensive. Those who do n't know about options will wait for the stock to drop and buy at that moment. Or those who are a little more advanced will place a buy order at the price of 1050, which is the price at which they want to buy. But the third and best of all, which I'm sure you'll do if you 're studying financial options with me , is to sell a put. It , is to sell a put. It currently has a price of 10.59. We make a contract for October 18th at a strike price or purchase price of 1050, which is the price at which I am interested in buying. And in return we will interested in buying. And in return we will receive $21 directly. If the price stays the same or goes up, I won't buy my shares and I'll keep my $21. I don't mind because I already thought it was expensive, I wasn't going to buy them, but in return I'm getting $21. If the price drops below 1050, then I'll buy the shares at 1050. And of course, I'll also keep the $21. If the price, for example, drops to $10, I will have to buy that package of shares at the price of 1050, which is what I had agreed upon in the contract. That's why you should always set a strike price or purchase price at the price at which you are interested in buying. This way, even if they assign us the contract and the stock is a little lower than what I'm buying it for, I'll be happy because it was my desired purchase price. And of course, as long as it doesn't go below the purchase price, we can keep repeating and repeating and repeating and repeating and repeating and repeating and winning 21 21. Honestly, for me it's the best options contract and it's my favorite. Let's check it with the broker. I personally invest in Interactive Brokers and you'll find a free course on how to use Interactive Brokers and other platforms in the description. If you decide to start with the options and open an account, I would greatly appreciate it if you description. Once on the platform, we just need to search for the company name and go to the options chain. And now we'll have to decide a couple of things. First, the strike price, which is the price at which we want to buy. In this case, the price is at 1059 and I can set the strike price at 1050. If the stock price falls below 1050, then we will buy the shares at 1050. And the second thing I have to decide is the date, that is, when this is going to happen, whether in a week, two weeks, a month, or whatever date you want. And well, of course, the best part is seeing how much money they're going to pay us, or rather, what bonus they're going to pay us. Depending on whether the strike price or purchase price is very close to or far from the price and date, we will be paid more or less. In this case, we received a premium of $21. I hope that's perfectly clear now. You already know that you can watch a completely free course on YouTube , but if you like it and want to learn much more, becoming an expert in financial options, I recommend you check out the advanced course where you will learn much more and you will join the community of smart investors. Let's move on to the market moments where we are interested in selling puts. Therefore, we will see when or with what actions it is in our interest to sell puts. First, if the price of a stock we want to buy is expensive, we want to buy it, but at a lower price than it currently is. Instead of waiting, watching the graph to see when it reaches where I want to buy, I can sell puts and with that money I have not spent, I can earn money through the premiums. And secondly, it would be as a strategy in bull markets. As you know, the ideal is not to have all your money invested, but also to have liquidity, or in human terms, to have money available in case a buying opportunity arises. By selling puts, we can generate a return on that money or liquidity that we have unused. instead of having it standing there without moving up or down. Well, actually, with inflation, if it's stagnant, it's always going to go down. Since we are in a bull market where stocks keep rising, we will never be allocated, meaning we will never have to buy those stocks. And so along the way, while everything else is going up, we're keeping all those bonuses that they're paying us every week. And if by chance we are assigned, that is, we have to buy the shares, we can always start selling calls, as I explain in this video, pros and cons of selling puts. As for pros, as I 've already mentioned a couple of times, we're getting extra returns on the liquidity we have without moving it, so obviously that's a big pro. And secondly, if we want to buy a stock, but we think it's expensive, instead of waiting and looking at the chart, we can set our purchase price, but in the meantime, we can start receiving money. And on the downside, there are very abrupt market movements. Using the same example as before, if the Using the same example as before, if the price drops sharply to 8, for example, we have agreed to buy them at 1050, so we are buy them at 1050, so we are buying each share 2.5 times more expensive, since in theory 1050 was our target price, we didn't mind buying it at that price, but well, it's a bit annoying that when it was at eight we bought it at 10.5. To make it even clearer and also to show you another way, another graph, let 's look at it on a graph. And for this section I'm going to use the Option Strat website, which is free and you can use it to start playing with different stocks, strikes and dates and see the different premiums they might be paying you. And to change the example, let's use Tesla, for instance . We will add a put sell contract , which is what we are studying. We can play with different strikes, but for this example we'll set it to 245. And we can also play with the dates. In this case, we're going to set it for 11 days from now, obtaining a premium of $982.5. the price stays above 245, we'll simply earn our $982.5 premium and won't have to buy any shares at all. If the price is shares at all. If the price is between 245 and 238, we will have to buy the shares because it has dropped below 245 and the profits will depend on the price at which we buy. If it's 238, the total profit will literally be zero, since we bought at 245, but thanks to the premium we have no losses and if it's higher we'll have profits. And finally, if the price drops below 238, then obviously we'll have losses, but well, as I said, in theory 245 was already a price at which we were interested in buying and that's why we should be happy. 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