Retire on $250K? Create a $6,000/Month Salary Selling Weekly Options (Step-by-Step Guide)

[00:00:00]This is an educational example based on my personal account. Results vary widely and nothing here guarantees profit or future performance.

[00:00:08]Hello and welcome to the Trading with Ashley Show. This video is very special to me because it is something that I needed before I jumped into the world of options trading for a living. In this video, I'm going to show you how as a retiree, you can take as little as $250,000 and create a salary for yourself something around $6,000 a month by selling options. I'm going to give you my entire playbook and I'm even going to take it a step further. I am going to show you examples of quality companies that are in the Mag 7 and how they are producing that in premium in weekly options. This is one video you want to take notes, you want to save and you want to share it with a friend that is just sick of life in corporate America.

[00:00:56]They want to live life on their own terms. This could truly be the freedom that they have been seeking. Okay, let's get into the details. The first thing I want to discuss with you is how much money should you put aside that you're not trading with. Now, this is very important because it's really important that you have cash to the side. I say 3 to 6 months of expenses. That way if the market is pulling down, you do not have to exit your positions at a loss to pay the light bill. So, it's very important that you get that together before you start on this journey of option selling.

[00:01:30]Once you've done that, then we move to step number two. Step number two involves taking that trading account and starting to sell cash secured puts. Now, you can use margin, but I only use 30% of margin because I want to insulate myself in case there's some kind of market drawdown that's more dramatic in nature. Now, as you start selling puts, we're going to be doing weekly puts in this example. I like to ensure that I don't take assignment of more than 20% of my trading account. Because once I've taken assignment in the wheel strategy, you can start selling covered calls, which is great. But if the market pulls down and you have all of your money tied up in equities, then you just have to wait. You cannot generate income in the interim. Some of the best times to sell puts is when the market panics and the VIX is elevated and there's fear in the market. You can get a lot more premium if you have the cash available. So, I like to keep 80% of my trading funds selling cash secured puts. Then if I take assignment, I want to keep that at about 20% of my total portfolio. Now, if you're doing this in retirement, you don't want to take chances with stocks that are considered meme stocks or speculative companies. You might be able to do that if you're just trading for fun or you're blending it with quality companies. But in retirement, we can't take a lot of chances. So, I have hand-picked some stocks for you to consider. I'm going to show you why they're quality companies. The reason you want to deal with companies like this is buyers show up for them, especially when the market's under pressure. But you can still produce a lot of incredible premium working with these quality companies. And if this makes you too nervous, then you could just trade the indices. You could trade the spy or the Qs and then they have diversification built in. That's something that a lot of my retirees in my community do. They just trade the indices and it works out incredibly well for them. Now, my rules for actually trading has to involve the RSI. It's the relative strength index. Now, I'm going to show you for each of these how I look at the RSI and it helps to determine my entry. If that RSI is 50 or above, I shoot for the middle of my Bollinger band. If that RSI is below 50, I'm shooting for the bottom of the band. If you follow these rules, you can usually get a really fair entry on a quality company. And if you're assigned, you can ride that Bollinger Band up and have a nice call away. Rule number four, let's talk about expiration dates. When I first started trading, I liked doing weekly options. One, the repetition helped me as I was learning. I have found members that join my community, if they're doing weekly options at first, they really get the muscle memory and they learn a lot faster. Once you get more competent at this, then you can stretch out to longer periods of time.

[00:04:19]Maybe monthly if you're going on a cruise or doing something fun that you can't be at your computer, you can push it out a couple of months. I have a lot of members that do that as well. But for starters, weekly should do just fine and there'll be less potential movement that way that'll help you gain your confidence as you're learning. My fifth rule is don't be afraid to cut losing trades if you notice that something drastic has changed on the stock. If the fundamental story has changed from when you got into it or if it's turned bearish while you're in the middle of the trade, typically this is after assignment. It's okay to get out of the trade even if it's a loss as long as you have more winners than losers, you should do well. Now, the demonstration I'm going to show for you, there's a lot more than 30% annualized premium, but that's by design. It's higher than that because you want to leave a little room to wiggle out of trades that aren't working in your favor. Now, if you're simply selling a put, a lot of times that'll work out just fine or if you're getting assigned at a fair price, that'll be just fine, too. But I'm talking about when something drastic has changed with the stock that you were selling puts on or that you were assigned. You have to be okay cutting the losses because you need to gain control of your portfolio, you need to gain control of those funds so that you can keep producing income from them instead of being stuck in a trade that you hope turns around. Just like in corporate America, if you're a CEO, you have to be the CEO of your portfolio.

[00:05:45]You have to take control of it and have it do for you what you want it to do.

[00:05:50]Okay, let's jump into the computer and I am going to show you the examples of how this works so that you can have what you need to get started in this wonderful world of options trading. The first stock we are going to start with is Nvidia. Now, at the time of recording, Nvidia is trading at about $207 a share.

[00:06:09]So, I want to show you something. If you look down here at the RSI, it is at 52.

[00:06:14]Because I like to go to the middle of the band, I am going to look for an entry at around $200 on Nvidia and I'm only going to go out 1 week. Now, Nvidia is a quality company. You can tell just from doing a little bit of research.

[00:06:29]This is on the analysis tab on Yahoo Finance. They produce a very good revenue and they have great earnings.

[00:06:35]And you can see they continue to outperform on their earnings. So, this is a really solid, healthy company.

[00:06:41]There's a lot of cash available in the company. And again, like I said, a buyers will show up for a quality company like Nvidia. Let's see how much we can get in premium if we go with that 200 strike a week away.

[00:06:54]Once you get on your option chain, you need to select your expiration date.

[00:06:57]Now, at the time of recording, this is 8 days away, but you can do anything between 5 and 10 days away. If you look right here at the $200 strike, this was the middle of that band. If I put up the $20,000 to actually accept Nvidia at 200, then I will be paid $1.84 a $184.

[00:07:17]In 1 week's time, that is going to give me about a 0.92% return. 52 weeks done over and over again, that gets you to 47% annualized return. The next one we are going to review together is in Google. Google is absolutely a quality company. In fact, I'm on YouTube right now, so this is one of Google's companies is YouTube. So, I want to show how to evaluate this. Now, Google does have earnings coming up and this particular trade will be trading over earnings. So, I want you to use caution, but the reason I wanted to go ahead and include it is if you're selling options for a living, you will come across these quality companies like this that do have earnings. I don't want you to be afraid to trade over earnings as long as you're getting a fair entry in the event of a pullback. So, if we look at where Google is trading right now, it's at around 347. The RSI is under 50. It's at 43. So, when that happens, I want to go for a fair entry at the bottom of the band. So, let's look right here somewhere around 335.

[00:08:21]So, we'd have to consider if after earnings Google sells off and I've got this trade open, I would be assigned Google at 335, even if it fell all the way down. So, that's something to consider and that's something that usually I adapt the trading and push it out a little bit longer, but for the sake of this video, let's stick with 1 week out. I'm going to show you the incredible premium that's being offered.

[00:08:42]Here we are on the option chain. I'm looking at 729, which is 8 days from the time of this recording. If you look right here at 335, you will get $605 at this point in time for putting up 33,500 to accept Google at the bottom of the Bollinger band. Now again, this is elevated because of earnings. You might see this about half of that if you weren't trading over earnings. But, that's okay because the returns are stellar. If you look at just what it's paying right now, that turns out to be about a 1.8% return in 1 week. That equates to about a 93% annualized return. Again, you can cut that in half if you're not trading over earnings.

[00:09:25]This is the only stock that I'm sharing with you that you actually would be trading over earnings. Now, let's take a look at Amazon with an RSI at 51, a fair entry for this stock would be right here anywhere between 240 and 245 at this point. Let's go look on the option chain to see what we can get for selling premium to take Amazon at the middle of the Bollinger band. Once you get on the option chain, expiration date 8 days away. If we go right here to 240, this is actually under where we left out on the band. It was around 243, so this would actually be a little bit safer.

[00:09:57]Looking at this, you'd have to put up 24,000 to accept Amazon at 240. You would be paid $212 to take this trade.

[00:10:05]That equals 0.88% in 1 week, which ends up being about 45% annualized. Next, we're going to look at Meta. Now, if you had been trading Meta before and you were assigned and it dropped $100, this would be one of those trades that you would have to evaluate and determine if you get out of it early. It's just now coming back to life, but you would have been stuck in this trade for quite some time. So, I really want you to look at that. There's other things we look at like MACD crossover to look whether it's bullish or bearish, but if something has changed with the stock and you're stuck in the stock, that's when you would consider getting out because this is a lot of money when you're talking about a ticker price at this level to just hope and wait it comes back. So, keep that in mind. But, if we look right here at the RSI, we're at 56. So, if we shot for the middle of the band, we're going to be right there anywhere about 615 into down to about 610. So, we'll go look on the option chain and see what we can get. We want to avoid earnings on this one, so let's look at the date. The earnings date is going to be at the end of the month, so we are going to go with 727.

[00:11:09]It won't be a full week by the time I put on this trade, but it's close enough. If I go with 615, I'd have to put up $61,500 and I would receive for that 342 dollars. So, $3.42 a share for selling this put. That is going to give me a 0.55% return. Annualized, that's about 28%.

[00:11:33]Finally, let's take a look at another very popular MAG 7 stock. This is Microsoft. Now, Microsoft is trading at 83 on its 14-day RSI. So, based on the rules that I laid out for you, we would want to shoot for something around 385.

[00:11:47]That's the middle of the band to see what kind of premium we can get. Now, they do too have earnings coming up, so this trade will end before earnings.

[00:11:56]Once you get on the option chain, you want to find your expiration date. This one is 6 days away from the time of recording. So, you look right here at the 385 was the strike that we'd settle on that was going to be the middle of the band. You can see right here you'll receive $2.30 a share. That's $230 in 1 week or putting up $38,500 to accept Microsoft at this strike if on this expiration date it ends at 385 or lower. Now, let's put it all together. I had mentioned that $250,000 would produce the kind of income that you could live from. Well, in this scenario, if you add together all up the capital required, now this is just using cash. This is not using margin. To put on each of these trades collectively, you would need $177,500.

[00:12:45]The premium that that $177,500 produced would be $1,568 in 1 week. If you multiply that by four, you're looking at a monthly salary of about $6,200 and $72. So, you can see we didn't even use all of the cash available to us to make these trades.

[00:13:06]Now, the reason I want you to have a little bit of extra cash is what I'm going to share with you in my next video. It's alternative ways of trading that give you a little bit of boost in your portfolio when the time is right. I hope you found that helpful and it motivates you. One of the most important rules I saved for last. That is be a part of a community where you have a mentor that will actually show up for you. That will answer your questions and be there in the trenches with you every day. If I fit the bill for you, I would love to personally welcome you into my community. There's a link below to help get you started. Now, my next video, this is going to be a series, I'm going to go over additional ways to trade in retirement so that you can up the amount that you're making once you get confident. Remember, if you're with me trading with Ashley, there is no trader left behind.