Tastylive: Call vs Put Selling – This Strategy Wins 81% of Trades

Traders have a variety of ways to profit from market moves. One of those ways is to use options. Generally, call options are cheaper to buy than put options. That’s due to investors using put options to hedge.

However, the market tends to rise over time. That should indicate a preference by traders for call options. Over shorter periods, however, markets appear much more randomized.

For instance, over a 45-day period, markets will only rise about 65 percent of the time. And that rise may not be big enough to justify the costs of options trading.

Given the higher premium in put options, most of the time, selling a put option makes more sense.

By selling a put option, an investor is essentially making a bet that markets will rise, stay flat, or only fall slightly.

The result is a win rate 81 percent of the time over a 45-day period. That compares favorably to a 63 percent win rate for buying a call option.

Even better, selling the put option has a better average profit and loss relative to the risk compared to buying the call option.

The downside is that in extreme market selloffs, selling puts can lead to big risks. Maximum losses can be higher. Events like the market meltdown of March 2020 could hit this strategy hard.

To look at how to best set up a high-win-rate options trade, click here.