Free one-page PDF for option sellers
Before you sell the put, make sure you want the stock.
A perfect strike on the wrong company is still a bad trade. Run four quick checks before premium, strike or expiration enter the picture.
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How it works
Short enough to run every time.
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60 seconds
Run it before your next put. About a minute once you know where to look.
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4 checks
Ownership, earnings, risk and liquidity. The essentials before you look at the option itself.
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1 rule
One bad answer and you move on. There's always another stock.
The mistake this prevents
A great premium can make a bad stock look tempting.
When you sell a cash-secured put, you're agreeing to buy 100 shares at your strike if you're assigned. So before you ask how much premium you can collect, ask whether you'd be glad to own the company at that price.
Would I be glad to own this company at my strike? Not willing to tolerate it. Glad.
What you'll check
Four checks before the option matters.
The PDF walks through each one: what to look at, where to find it, and what counts as a fail.
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Ownership
Everything else depends on this one. If you wouldn't be glad to own the shares, you stop here.
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Earnings
Two things to read, in order, plus a quieter signal that can matter more than the headline.
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Risk
Rich premium often reflects real risk. One simple number shows how rough the ride has been, and the PDF gives the level where it's too rough to own.
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Liquidity
Thin open interest and wide spreads cost you going in and coming out, and can make a position hard to close or roll when you need to.
Where it fits
S is for stock selection first.
The Stock Test covers the first letter of the SMART Option Selling System, the five checks every one of my trades has to pass before it's placed. The company comes first because every later decision depends on it: where the strike goes, when to enter, and the rules that hold when a position moves against you.
- Stock selection first
- Margin of safety in strike selection
- At the right time
- Rules before results
- Time working for you
Already have the Stock Test? The other four letters are in The Triple Income (Wheel) Strategy, with five companion tools to put them to work.
See the bookRun the test before your next put.
It's free, it's one page, and it takes about a minute. If the stock doesn't pass, you move on.
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