One of the biggest myths in options trading is:
👉 “You need thousands of dollars to sell puts.”
✅ True — if you’re selling cash-secured puts (CSPs), you need enough cash to buy 100 shares, often $5,000–$10,000+.
❌ But here’s the truth: Put Credit Spreads let you trade the same idea with a fraction of the capital.
🔑 What’s a Put Credit Spread?
A Put Credit Spread (PCS) is simple:
- Sell a put (collect premium)
- Buy a lower strike put (insurance)
This caps your risk, lowers the margin requirement, and makes the trade small-account friendly.
📊 Example 1: $10 Spread
- Sell 1 Put @ $100
- Buy 1 Put @ $90
- Net Credit = $2.50 ($250)
Max Risk = $10 – $2.50 = $7.50 ($750)
Max Reward = $250
👉 Instead of tying up $10,000 on a CSP, this trade only requires $750.
📊 Example 2: $5 Spread
- Sell 1 Put @ $100
- Buy 1 Put @ $95
- Net Credit = $1.50 ($150)
Max Risk = $5 – $1.50 = $3.50 ($350)
Max Reward = $150
👉 Just $350 at risk versus $10,000 on a CSP — perfect for small accounts.
⚖️ Risk Management Rules
- Profit Target: Close at 50–80% of max profit
- Example: Collected $150 → Take profit at $75–$120.
- Stop Loss: Cut at 2–3x the premium collected
- Example: Collected $150 → Stop out if loss hits $300–$450.
This keeps losers small and lets winners add up over time.
🚀 Takeaway
You don’t need a massive account to sell options. With Put Credit Spreads you can:
✅ Define your risk
✅ Trade with less capital
✅ Build consistency in a small account
Check out my latest video on this strategy:
|
Until next time...
Gautam
(Your Financial Freedom Coach)
