Expiry for selling put options

[builder2818]

Is it better to sell a put option with an expiry date of about 4 weeks or a few months out to get a better premium? I have only just started looking into options.

 

[Timmy]

Everything else being equal the more time value left on an option the more it is worth; so you will receive more premium selling an option with a longer time to expiry than with a shorter time to expiry.

Now, mine is a very simplistic reply, there is much to consider in the decision to sell a put than just the time to expiry of course.

 

[jackson8]

Is it better to sell a put option with an expiry date of about 4 weeks or a few months out to get a better premium? I have only just started looking into options.

be aware of the inherent danger of selling a naked put

you may have the stock assigned to you if the price falls and what if the price gaps down well below that strike price you may end up paying 10$ for a stock which is now only worth 5$
far too much to put into this thread (pardon the pun)

there are quite a few threads on this subject if you look under derivatives under forum jump
i personally only sell the front month

there are a lot of variables and $$$ risks to look at if you are getting into the selling of options

 

[cutz]

Is it better to sell a put option with an expiry date of about 4 weeks or a few months out to get a better premium? I have only just started looking into options.

I’m with Jackson8 on this,

Put selling is a very risky business especially these days, so when you work out the premium per month on your 4 month contract is it really worth laying it on, what's the advantage over front month only?, it doesn’t leave you much room to maneuver if things go pear shaped.

 

[emilov]

Also, initial margin on naked puts is going to be pretty high.

So, instead of selling puts, just sell a bull put spread. That involves selling a put and adding protection by buying a put that is more out of the money. This way you will get less premium but be protected in case the stock drops dramatically (hey, and that seems to be en vogue nowadays ).

Also, when doing the above I would not consider anything further than the current month. You see, sold puts/spreads profit from time decay and ideally you want them to expire as quickly as possible and you want them to expire worthless.

I recently did a bear put spread on XJO (S&P 200). I made about 1000$ on it after commission. Have a look. This was a trade that I did 2 weeks prior to expiry.

Cheers,
Emil