10 Years of Options-Selling Profits... (Coronavirus Stock Market Crash)

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Selling put options against stock market indexes (such as the S&P 500) has been a wildly successful options trading strategy during the 2009-2020 bull market period.

It makes sense, as put options expire worthless when the stock is above the put's strike price at expiration. In a rising market, out-of-the-money put options often expire worthless. Sellers of the put options, therefore, keep the premium collected when they sold the options, and the strategy can be repeated each month to continue generating profits.

Unfortunately, selling put options is like selling catastrophe insurance. Most of the time nothing bad happens and the insurance premiums are kept. But every so often, a catastrophe occurs and the insurance company pays up.

In the stock market, the catastrophe we've just experienced was a 32% drop in the S&P 500 in less than a month, which was incited by widespread health and economic uncertainty caused by the Coronavirus outbreak.

In this video, I examine the historical performance of short put strategies on the S&P 500 ETF (ticker symbol: SPY), including the performance through the violent stock market crash of March 2020.

How did selling puts perform through the violent downturn? How big were the losses and how was the strategy's long-term profitability impacted by the crash?

I backtested selling puts each month without any management, as well as with a stop-loss.

I hope this research opens your eyes to the risks of selling out-of-the-money options, particularly index put options.

Be sure to leave a comment down below with any questions you may have!

=== RECOMMENDED VIDEOS/RESOURCES ===

Selling Puts Explained: https://youtu.be/RO0ezQEWXdM

Implied Volatility Explained: https://youtu.be/H-NHZq-skFo

Stock Options Trading 101: https://youtu.be/3bELT5FZCic

Why Early Exercise/Assignment is Rare: https://www.youtube.com/watch?v=7pTb1a5IgKM

Options Trading For Beginners (PLAYLIST): https://www.youtube.com/playlist?list=PL33AZa4cv-o58ldr-5zSn4ROx4SZG7Jyo

tastyworks Tutorials (PLAYLIST): https://www.youtube.com/playlist?list=PL33AZa4cv-o56a2BO3jpK_PBUFe3FdvxP

Option Pricing EXPLAINED: https://youtu.be/-nnJ4pMBaxA

Options Trading 101: https://youtu.be/3bELT5FZCic