Learn options selling

Written for the seller, not the buyer. Most options education explains how to buy a call and hope. This series covers the other side: collecting premium, what you give up to collect it, and the arithmetic that tells you whether a given trade was worth doing.

Start here: the basics

Twelve articles, live now. What a contract is, what the four positions risk, how to read a chain, and where the premium actually comes from. The basics pillar orders them and says which three to read first. Written last on purpose, so every page hands off to a real article rather than a promise.

• What an options contract is
• Calls against puts, for sellers
• Strike, expiry and premium
• How to read an options chain
• Bid, ask, mid and mark
• Intrinsic and extrinsic value
• In, at and out of the money
• Why option sellers get paid
• The four basic option positions
• American against European exercise
• Open interest against volume
• Spotting an adjusted option contract

Covered calls, in full

Fourteen articles, live now. Start with the covered calls pillar if you want them in a sensible order.

• The covered call, end to end
• The covered call payoff, in three zones
• Picking a strike: what each delta actually buys
• Choosing an expiry: weekly, monthly or 45 days
• Annualizing a covered call, correctly
• Static return vs if-called return
• Covered calls on a stock you do not want to sell
• Rolling a covered call: up, out, and up-and-out
• When rolling a covered call is a mistake
• Covered calls and dividends
• The covered call ladder
• Covered calls vs just holding: the honest comparison
• The poor man's covered call, and what it really costs
• Covered calls into earnings

Cash-secured puts, in full

Ten articles, live now. The cash-secured puts pillar puts them in order and says which three are the trade.

• The cash-secured put, end to end
• The cash-secured put payoff, and where it breaks even
• Getting paid to set a limit order
• How much cash a cash-secured put really ties up
• Picking a put strike, by delta and by support
• Annualized return on a cash-secured put
• Rolling a cash-secured put down and out
• Cash-secured put versus buying the stock outright
• Naked puts versus cash-secured puts
• Cash-secured puts on high-IV stocks

The wheel, in full

Ten articles, live now. The wheel pillar orders them and says which three are the strategy. The other seven are about the cycles that stop turning.

• The wheel strategy, one full cycle
• How to pick stocks for the wheel
• What the wheel actually ties up
• Assigned at a loss, and what to do about it
• When no strike above your basis pays anything
• What happens to the wheel in a crash
• Wheeling ETFs against wheeling single stocks
• What $1,000 a month from the wheel actually requires
• Compounding option premium, and what stops it
• When to stop wheeling a stock

Volatility, in full

Ten articles, live now. This is where the premium in all three strategies above comes from. The volatility pillar orders them, and every one of them runs on the same illustrative chain so the numbers agree page to page.

• What implied volatility actually is
• Realized volatility, and how to compute it
• Implied against realized, and the gap between them
• IV rank, IV percentile, and what both of them miss
• The volatility smile, and why equities smirk instead
• Put skew, and what it is worth to a seller
• Reading the term structure across expiries
• IV crush, and why it is only half the trade
• VIX against single-name implied volatility
• Four ways to measure the same volatility, four answers

The Greeks, in full

Twelve articles, live now. The Greeks pillar orders them and says which four you actually need. All twelve take apart the same short covered call.

• Black-Scholes, and what it actually assumes
• Delta, read three ways
• Delta is not the probability, and the difference has a shape
• Gamma, and the last week of a short option
• Theta, and the word income
• The decay curve bends two ways
• Vega, and losing money on a flat day
• Rho, and why you can mostly ignore it
• Vanna, charm and vomma, and whether you need them
• When you sell, every sign flips
• Adding up delta across a book
• Put-call parity, and what it forces to be true

Assignment and expiration, in full

Ten articles, live now. What happens when the trades above stop being theoretical. The assignment pillar orders them, and all ten follow one covered call through its final week.

• Assignment day, hour by hour
• Early assignment, and when it actually happens
• Call assignment against put assignment
• Pin risk at expiration
• Automatic exercise, and the $0.01 threshold
• Closing against letting it expire
• The 50 percent profit rule, tested
• Assignment on ex-dividend day
• Mergers, splits and adjusted contracts
• Expiration Friday, in order

Screening and probability, in full

Ten articles, live now. Picking the trade before any of the above applies. The screening pillar orders them, and all ten run on one screen: 60 names, one expiry, 812 contracts in and four out.

• Probability of profit against probability of touch
• Expected value of a premium-selling trade
• Why 0.20 delta is about 80 percent
• Reading a probability cone
• Building a covered call screener
• Liquidity screening, and what to reject
• The bid-ask spread, quantified
• Fill probability, and the price of impatience
• A good setup against a bad one
• The dates that should veto a trade

Running the book, in full

Nine articles, live now. Everything above is about one trade; this is about a portfolio of them. The risk pillar orders them, and all nine run on one simulated year in which five of six positions were assigned in the same six weeks.

• Position sizing for option sellers
• Single-ticker concentration risk
• Correlation risk in an options book
• Maximum loss on a cash-secured put
• Picking up pennies in front of a steamroller
• Margin against a cash account for option sellers
• The options income ledger
• Did the covered calls beat buy and hold
• Option seller psychology

Taxes, in full

Four articles, live now, on the same year. The tax pillar orders them and starts with cost basis, because everything else measures from it. Each one quotes IRS Publication 550 by page number.

• The wash sale rule and option selling
• Capital gains on assigned shares
• Cost basis after assignment
• Section 1256 and index options

Defined risk, in full

Three articles, live now, running on the same chain as the basics series. Credit spreads, iron condors and iron butterflies cap the obligation with another option instead of securing it with shares or cash, which is a different trade with a different set of ways to be wrong. These three have no pillar of their own on purpose: an index page over three links would be thinner than the three pages it indexed.

• Credit spreads explained
• Iron condors explained
• Iron butterflies explained

That is the whole series

All 104 articles across ten pillars are published. Nothing here is a placeholder and nothing links to a page that does not exist. What comes next is maintenance: re-verifying the sources each carries against their date stamps, and rewriting anything the market proves wrong.

How these are written

• Worked examples with real arithmetic. Every number is shown, not asserted. Prices are illustrative and stamped as such, because a tutorial quoting live prices would be stale by the time you read it.
• Primary sources, linked. Exercise thresholds come from the OCC, tax rules from IRS publications, index returns from the published index data. Each carries the date it was checked.
• The unflattering parts stay in. The ten-year record of covered calls against buy and hold is roughly half the return. That is on the page.
• No scoring internals. These pages explain textbook options mechanics, which are public. How the OptionsKing confidence score is computed is not, and never appears here.

The tools that go with them

Every article links to the calculator that does its arithmetic. All twelve are free, run in your browser, need no account and store nothing you type.