Selling puts has worked for me the last few years. When I feel a stock has been beaten down sufficiently, I sell puts at the nearest strike price below the actual price. Do this with stocks you wouldn't mind owning in the first place. In 08 GE was around 12, and I sold puts with a strike of 10. The last day or two before expiration, GE broke below 10. I was assigned the shares. But, I had the funds in my account to buy the shares. I really don't recommend doing this "naked". In short order GE was back in gear, in the mid-teens. Then I sold calls on my stock, strike of 15. It jumped above 15 before expiration, and the contract was exercised. So, I earned the premium on the calls, and a profit on the sale. In August of this year I sold 10 October 5 puts on Bank of America. I had the 5K in cash in my account. The premium for the puts worked out to about 8% for two months. They expire in 10 trading days. In which case I pocket the 8% and move on down the road. Or, possibly the stock breaks below 5, and I have to buy the shares. Time will tell. Anyway , it's an interesting strategy to generate income when interest rates are basically zero. What is preferable is for the stock to stay above the strike price and the contracts expire worthless, which is what the seller wants.
I have never been an options guy, so am not to well versed in them, besdies the stuff I learned years ago for the Series 7 test.. I think the only downside to this is if the stock fell dramatically, you end up buying the stock at a price hiugher than the current (lower) value.. But again, if you feel its just a temporary decline, and the stock is already cheap, then its a decent strategy.
I could buy back the contracts now for $1 each and close out my position, but I've decided to wait out the week and let them expire worthless on Friday. So much more gratifying.
One thing about options that you need to be aware of.............you have to be willing to lose your money. It is a bet with the holder on the other side of the contract only. I have done covered calls in my IRA for income, but I've also been willing to have the contract get exercised and my long shares be delivered. Its happened to me three times on about 9-10 covered call contracts. I like the idea of selling puts but you either need to do it in a margin account or be cash covered to the value of the underlying position. This is a lot of cash to commit sometimes. I'm glad its working out for you though.
You're right Shelts. But I would never recommend selling puts naked. It's a good strategy if you're sitting on some cash earning nothing. Selling covered calls is a good one too. I read once that the vast majority of long option contracts expire worthless. Then, I had a eureka moment. Be the seller.