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This is a tutorial based on my results; results may vary widely and nothing here guarantees profits or future results. Hello everyone. Welcome to the trading show with Ashley. Of course, it's dark behind me because I ran out of daylight to release this video. But I look forward to helping you. This is perfect for those who really want to sell a put option to start learning the wheel strategy but don't know how to do it.
You just don't know what steps to take. In this video, I will teach you how to sell a put option on TQQQ. What is TQQQ? Well, it's a credit product that tracks the Nasdaq, that is, QQQ. I usually don't really like selling puts on credit tickers because of the erosion dynamics. However, I have studied this particular ticker, and it works very well for several reasons.
First, the market is growing over time. If you look at a 12- month period over several years, the market shows an upward trend approximately 75% of the time. So that makes this kind of deal a little safer than usual. Of course, nothing will protect you from a major correction if it happens unexpectedly.
So I just want to voice this caveat. There is no guarantee that you will make money and you may lose funds doing so. But if you want to learn the ins and outs of trading, I'll show you the steps to sell your first put option on TQQQ. How much money will you need to sell a put on TQQQ? You need to look at the current price of TQQQ.
Let's say it's $80. If it is $80, you should multiply it by 100 and that will give you the amount of cash needed to open the deal. So, in this scenario, you would need $8,000 to sell one put option on TQQQ. And the reason is that when we sell an option, it represents 100 shares. One option corresponds to 100 shares.
And that's why you should always have cash to secure the deal. What is selling a put option? This is where the fun begins. This is where the learning begins . When you sell a put option, you are essentially entering into a contract with another trader. You don't even know who this trader is. All of this goes through a clearing house, which brings together sellers of put options with their buyers.
They take on all these processes. You simply agree to buy 100 shares of the company or ETF you sold the put option on if the price falls to or below the strike price by the expiration date . What's the trick? Well , here's the trick. You get a prize. That's good. You keep this award for yourself. It is yours regardless of whether the price reaches this level or not.
This is the most interesting thing about selling put options - leaving the premium in any case. But if the price of TQQQ falls significantly below the price you agreed to buy it at, you may feel trapped , having to buy the shares at a price that may be higher than the market price. So I will help you choose an execution price.
There are many things you can do if you find yourself in this situation, but this is a more advanced topic that I will help you with in the community when the time is right . For now, we will determine at what price we are comfortable buying this ETF, and then sell the put option. I'll show you everything step by step to make it as simple as possible and you can try it yourself.
You can practice on a demo account to see how it works. Okay, let's move on to the computer so you can sell your first put option on TQQQ. Of course, I want you to understand what you're trading, not just blindly copying some woman on YouTube you just found. So let's take a look at what TQQQ is. Remember, this is leverage for QQQ.
Let's see what's included in the Nasdaq. As you can see, there is a very large share of the technology sector here. That's why I love it so much, because I believe we're at the beginning of the AI cycle, so the technology should show good results over time. But there are other sectors there too. These are communications services, consumer goods, industrials, a little bit of healthcare, utilities, energy, and financial services.
If you scroll down the page on Robinhood, you will see who is part of the Nasdaq and you can familiarize yourself with the major tickers. These are Nvidia, Apple, Microsoft, Micron, AMD, Amazon, Meta, Google, Tesla—you've heard of them. And that gives you an idea of what you're trading, saying that you would be comfortable and happy owning a leveraged ETF based on all these different tickers.
So if that's okay with you , we'll now move on to evaluating TQQQ so you can see where to even start selling a put. If you go to a site like Yahoo Finance, I have QQQ displayed here , and you can see all the different metrics on QQQ. That's great, but we work with TQQQ. So I'm going to set this up. I like to be more cautious with TQQQ as the leverage dynamics tend to drive its price down a bit over time .
If you scroll down the page and click on the graph, it will open. Now my graph is filled with all the data I'm looking at, and I'll explain to you what you're seeing. This shows potential price dynamics based on probabilities. I have two standard deviations set. This shows that within two standard deviations, TQQQ is likely to stay in a range between 81 and 64 at this point in time.
This is a fairly wide range. I understand that. So, what should we do? How do we know what is a potentially good entry point at this moment based on price action? To do this, I look here, at this RSI indicator. This is a relative strength index. This number you see will range from one to 100. When I see it above 50, it means the stock is in an uptrend.
This is the 14-day RSI. It looks at activity over the last 14 days. So when I see that, I like to sell a put in the middle of that range. It's about $73 to get in. If you want to be more cautious, you can be more conservative and choose a lower level. See this line right here? This is another important line for a stock, and especially for an ETF.
This is the 50-day moving average. So you can choose an entry point somewhere around 70 or 71 if you want to get it at a lower price in case the option is exercised. If this indicator is below 50, I try to focus on the lower limit of this range. After all, ideally, if you are appointed, you won't have to wait too long for the shares to start growing and pulling you along, helping you make money.
So , with that in mind, we're going to go into Robinhood, and I'm going to look for something around 70 or 72 to sell a put with an expiration in a week. Let's do it now. Once you get into Robinhood and enter your ticker, you need to go to this little button that says "trade TQQQ options." Of course , you must be approved to trade options.
This is a process you go through with your broker. But once you are approved and you are ready, look for the " sell" button because we are selling this option and you are selling the put. So, you press the "put" button. Now the expiration date . First, you need to select an expiration date . I like to take a 7-day deadline.
So from now on, I'll be looking here. Here are 6 days, here are 8, I'll just sell this option on October 7th. It's 8 days away, that's about a week. Once you specify this, all the different options you have will appear. Now remember, I was interested in something in the $72 range. So, let's get to it.
Let's scroll all the way down . Let's look here, at strike 72. This shows that if you invest money to buy 72 shares, that's $7,200 that should be in your account, then the broker will pay you $0.81 per share. So, $81 for putting those funds towards buying TQQQ at 72 if the price drops to 72 on the expiration date , October 7th.
So, after you sell it, you have $81 in your brokerage account , what next? Now it's just a wait. I like to do this, especially when I was just starting out : I would just watch the deal go for a week, not touch anything, and then when the expiration date came around , I would make a decision. If I were to trade well above my strike price, in this case I would choose 72.
So if the price is, say, 75, it's likely not going to fall to 72. I'll just let it expire worthless and then try again next week. But if it looks like I'm going to be assigned at $72, I have to decide if I'm willing to hold this stock? If not, I will have to buy out the contract, and that will cost me money.
In this situation, I will lose money. But nine times out of ten, you're usually ready to commit to TQQQ shares if you were very careful in your selection and the world didn't fall apart after you got them. If you received the shares, you wait for their price to increase, and then either sell them at a profit, or, if you want to apply the “wheel” strategy, sell covered call options.
This is too much for one video, so I'll save the demonstration of how to sell covered call options until next time. But for now, you know how to sell a put option: it will either depreciate in value or your money will go back to your brokerage account for another try next week. Or , if the shares were assigned to you, now they are yours and you have to wait for them to increase in value .
I hope this helps you. I hope your confidence is growing right now. I hope you found this helpful. I did this because when I was learning to trade options, I wished someone had a simple beginner video like the one I just showed so I could at least start to understand the basics. So I hope this helped you and you can try it yourself.
Remember, if you are with me, trading with Ashley, no trader will be left behind. If you are a beginner trader and want to see my other beginner content, I will leave a video for you right here.
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