Transcription
Okay, my name is Awesome Bully and in this video I'm going to show you how I made over a thousand dollars using one simple option selling strategy. In this video I'm going to go through the real results, the proof from my broker, show you back test, I'm going to show you step by step how to trade this strategy, why I picked this one over others, how you can lose with this strategy so you're aware of the downside and how to prevent it, and I'll also give you a free bonus here at the end, so let's dive in.
Proof, let me go to my tastytrade account right here. You can see over the month of April 1st to April 30th, this has only been done on ES. You can see here I made $1,910 about just by using this strategy, which is insanely awesome. But not only that, I want to show you the back test right here. So again, the back test shows that this strategy does very well. You can see here we have about a 92.4% win rate, which is awesome to see. So it's very high. We can also see on average I'm making about $200 per trade. You can see here my average return per trade is about 7.6%. So overall it does very well. Obviously during bear markets it doesn't do well, but we'll talk more about that here in a second.
So, what is this simple option strategy? One of the best option selling strategies there is in the market as a whole is something called short put strategy. What a short put strategy is, it allows you to make money when the market drops slightly. So if the market drops but stays above your strike price, you can still make money. It helps you make money if the stock market stays the same, meaning it stayed flat through a certain period of time, and it allows you to make money when the market moves higher. So if we're in a bullish trending market, most of the time the market is trending higher when a bullish market, and that tends to be where you make your money. So, this strategy is typically reserved for bullish markets because it performs so well in that type of market.
So, what exactly is the breakdown of this strategy? Let me explain to you right here. This is what we're looking at. Number one, you're going to be trading it on an asset like ES or MES. This is my go-to. Now, what is so amazing about using ES or MES? If you're not too aware what these assets are, these are futures contracts, futures options, okay? What this means is you actually get a significant advantage to using futures, which I'll talk about more in a second on why I use this strategy, but my preference is always going to be the futures options over stock and ETF options. Although, you're welcome to use it on something like ES, MES, SPY, SPX, or XSP.
Next, you're going to sell a put at 60 DTE on a five delta option. What does this mean? This means that if I'm going to the broker, I'm going to go to the trade tab, I'm going to make sure I'm looking at ES. I'm going to go to the 60-day one that's closest to it. So you see right here, 61 days and 57 days. 61 is closer to 60 than 57, so I'm going to pick the 61 DTE contract, and I'm going to go closest to five delta. You can see I recently did a trade there. You can see here we go to five delta. We can also make sure that we're looking at volume. So we can do volume or we can do open interest. I prefer looking at open interest, but I'm only seeing volume right here for now, so I can pick the one that has the highest volume. So let's say five delta, highest volume. I would sell this put. That's how I would pick the option for this strategy. Just like this, you can see here I'm going to make about an $865 profit. I'm going to have about a 99% win rate, and I'm putting up about $6,800. Now, that is why we're using futures options, right? Because 865 divided by 6,800 means I will make about a 12% return on my money. So that that is what's so powerful about the strategy.
Now, we do have some management rules around it, so we're not going to make the whole 865. For this to make this work well and have the high such a high win rate that it does, we're going to put a 25% take profit on. So that means if we were going to make or we're going to collect about $1,000 in credit, then we're going to close out the trade once we've hit a $250 profit. Now, for a 200% stop loss, that means if we were had getting in at 1,000, we're going to get out at about 2,000. So that is kind of what that looks like right there.
Now, why do I use this strategy? A short put strategy is one of the most simple, yet profitable strategies that there are in the option selling world. It keeps everything clear, everything simple. Instead of having five different contracts that all interconnect in some weird way, you don't have to worry about that. A short put is super simple. You sell a put, it's just that one contract. That's it, that's all you do. Nothing else you really have to worry about.
So here's how I personally break it down in my account. For every $100,000 I have in the account, this is how I run it. A $100,000 account, about 15% of it or 15,000 is going to go into the short put strategy, which alone is going to generate me anywhere from 1,500 to $2,000 a month. Again, you can see here this one's around 1,900 so far, but again, we haven't actually fully closed the trade yet, so we're more at around $1,075 closed profits so far for this month. But not only that, if we're using $15,000 on the push strategy, that gives us two trades a week, which is more than enough. Two trades, if we're each trade them at $200 per trade, that's how we get to these numbers. But we don't want to put all of our money into options, into the option strategy, because it's very high risk, especially when we do futures. There's something called span margin, which means the margin could increase on you. You see, you need to have some cash set aside. So if 15k is all we're using for the short put strategy, which is honestly more than enough to make a thousand to two thousand a month, great return, right? But then we're going to put most of the rest that's not being used, the cash, into what's called ESCA, which is an ETF that follows the Treasury bills and things like that. This pays out a monthly dividend, and overall pays about a 4% return per year. So this on a monthly basis comes out to be a little over $250 per month just by letting my cash sit safely in ESCA.
So now, with my allocation of a $100,000 account, I can put 15 here and make about 1,500 a month, make about 250 a month from ESCA, and that will make me total around $2,000 per month, or a 2% return on my money every single month. Now, you might be saying, "Awesome, that doesn't seem like much." Guys, that is that's a lot of money, okay? Most people aim for a 6 to 8% return a year, but we're getting 2% a month. That equates out to about 24% a year. That's two, three, four times what the average market return does. So that's insanely great.
Now, what's also cool is now you have a goal to live by, right? Let's say you're going into retirement and you're like, "Okay, I need $2,000 to live off of." You know your goal or let's say it's like $4,000 to live off of per month. Yeah, if you want to live higher on the hog, you could do more, but let's just follow this math. 4,000 a month that you need, maybe that's the thing that you need to live now or you're just younger and whatever. You know the amount of money you need to live. Let's say it's 4,000. Let's say you're older, so you're going to get social social security. You know you get about $2,000 of that, which means you need about another $2,000 to make up the difference, which means you need a $100,000 account. Now, you can reverse engineer this, right? If you're trying to get to a $10,000 a month budget that you want to spend each month that you're just trying to make. Okay, we're going to get to that. Let's say we're making 2,000 a month, then we want to get up that we're going to do that five times. That means I need a $500,000 account. So that's how you can reverse engineer it.
Now, you'll be saying, "But Awesome, what if my account's smaller? What if I'm under 100 grand?" You can also do this on micro futures as well, like MES, and do it for a tenth of the cost. You can do this same type of strategy with a $10,000 account. Now, your return will be about 10x less or or a tenth of the price. So if I'm making about 2,000 a month, I'll make about 200, but still it's a great way to start growing. Still a 20% return on your money overall for the year.
Now, how can you lose in this strategy? You lose during bearish markets, so that's let's just make that clear. It takes a lot of money to get started, right? When we're talking about ES, you saw it takes about $7,000 to put on one trade. So if you're going to be putting on two trades on a weekly basis like I do, you'll need about $15,000 to do that with, ideally with more cushion cash on the side, so around 30, 40 at the bare minimum to do the way that I'm running it. Now again, I like to be super safe, that's why I'm only doing 15 grand on 100k. That's just my personal risk tolerance. Now again, you can do this with 10,000 easily if you're doing MES, because it's only going to take about $700 per trade, so you can do that. But MES doesn't have as liquid contracts, but it can still work, especially if you're just starting out. But it does take some money. And it also takes time, okay?
So how do we solve each of these problems, okay? First off, bearish markets, this is super easy. Use an indicator, use a moving average, use something that helps you determine what type of market you're in, whether it's bullish, bearish, or sideways. Again, you can add a 50-day moving average. When the market's above it, you then know you're bullish, and so that's when you're going to trade these. So just make sure that you're only trading this in a bullish market, and then have your stop losses to protect when it reverses. You can also leverage futures and micro futures if it takes too much money, right? to do the same trade on SPX, it would take $60,000 per contract, but if you use it on futures, it only takes 6,000. So you can see there, you get a huge margin advantage just by using futures. If you use micro futures, it's a tenth of that. So instead of using $6,000 to buy a power per trade, so I can use about 600, 700. So it can definitely be leveraged even if you have a small amount of money. And it takes time, absolutely it takes time. We're going 60 days out in the future. Now again, on average this trade closes in about seven days. Again, sometimes it goes two weeks, three weeks. Sometimes it closes in two days, but on average about seven days. And so if you can't wait that long, get over yourself. It's one of the most consistent prof- profitable strategies. I hate people who are just trying to get in get rich quick, have the zero DTE, one one DTE mindset, and then it messes with them because it's not a consistent approach to do such a short-term data contract. So, if you are not really bothered by how much time it's taking to be in the trade, although really not that long is one week, you could put up with that. If not, go outside, touch grass, turn your computer off, and get away from the market and just let this strategy work cuz it is a very good one.
Now, that's all I have for this strategy. Go put it into action. It's a really great one. It helped me make a lot of money selling puts in the put selling idea profit selling is what has made me all my money in my option selling space over the last 3-4 years. Again, I made about $40,000 last year from purely option selling and that mainly came from short put strategies.
Now, I do have a free bonus gift since you guys stayed until the end. I have a free community where you can chat with other option sellers. It also has over 10 different trading courses in there, some of which I used to sell for $1,000 each, but now they're all for free for that community. Also, this Google Doc you want to reference it so you can print it out and use it when you're trading so you know the exact rules and everything to follow, portfolio allocation, things like that. You can actually get access to this exact Google Doc for free all inside that community. That should be the link, the first link down in the YouTube description down below. Anyways, guys, my name is Austin Milly. Thanks for watching this video. I'll see you in the next one.