Selling Options Will Diversify Your Portfolio

Selling Options: We hear a lot about how important portfolio diversification and asset allocation are to our investments. The financial planners tell us how diversification is the best way to invest. We should “Never put all our eggs in one basket,” they tell us. Makes sense. If all our money was in one stock and the company went out of business, we would lose everything. Just ask the people who worked at Enron.


Search online and you will find millions of articles about how to diversify. Gold bugs will tell you to buy gold stocks and gold bullion. Conservative financial planners will tell you to buy bonds. Stock brokers will tell you to put your money into stocks but in different industries. Others will tell you to buy commodities and futures.


That’s all great when the market and the economy are doing well. But what happens when the economy is down or even when it is going sideways – very little growth but no decline either?


When the economy is up:

  • Stocks go up.
  • Companies buy supplies and so commodity prices go up.
  • Money flows to the stock market so bond and CD issuers have to pay higher yields.
  • And gold does whatever it wants.


When the economy is down:

  • Stocks go down
  • No one is buying commodities so supply increases and prices go down
  • Money flows out of stocks to bonds so yields come down. Plus the government will lower interest rates to spur the economy and that will cause yields to go down further.
  • And gold is still doing whatever is wants.


When the economy is sideways:

  • Stocks don’t move much at all.
  • Commodities don’t move much at all
  • Bond and CD yields are decent but nothing to write home about.
  • Gold actually goes down.

Options trading strategy

So how do you diversify your portfolio in bad or so-so times?


You could buy real estate. Real estate normally goes up 4% a year. And you can rent out the real estate if you don’t mind tenants. But real estate is not very liquid and you’d probably have to borrow money to buy any. Real estate to me, is a business, not an investment. The people I know who are doing well in real estate treat is as their business. Those that want it to be a passive investment either get sick of the headaches or never learn to turn a profit.


My suggestion would be to Sell Options as a way to diversify your portfolio.


An option is a decaying asset. When you sell options, the value of the option deteriorates everyday. Thus you make as time goes by.

Selling Options Planning

Options trading make money in up, down and sideways markets. So no matter what the market is doing, as an option seller – you won’t care.


If you talk to a financial planner, they will probably tell you that options are very risky and that only professionals use them. That used to be true. It’s not anymore. Options are gaining in popularity with new records being set every year for the amounts of options being traded. It is also true that your financial planner has probably never traded options and will not make any commissions from you if you begin to trade options.


Normally if your investments generate a return of over 10% a year, your financial planner will say he did a great job for you. And you might be happy with 10% a year. But with Option Selling you can earn more, a lot more. In fact, many option sellers aim to earn 10% a month – not a year. Heck even if you only did half that and earned 60% a year, that would be pretty good don’t you think?


I can’t cover everything about option selling here, but I can tell you that it should be something you need to look into to diversify your portfolio.  Even if you only use 10% of your total portfolio, it would increase your overall returns dramatically.


There are plenty of websites that will teach you about option selling. My favorite is – mainly because it’s my own website. Just imagine: 10% monthly returns working just 5-10 minutes a day.


  1. Jason on December 27, 2009 at 12:08 am

    I have read every email you have sent. I understand most of what you say, however I think I can achieve the same results and still own the stock if I am wrong, with covered calls, if I am wrong I will listen.
    Thank you,
    Jason Russell

  2. Genius on December 28, 2009 at 1:19 pm


    If you can then that is great for you. I know of no one who trades covered calls that can claim to make an average of 5% a month over an extended period of time. When you have gains they are small and limited, but when you have a loss, it blows up the house.

    When I first started with options I thought covered calls were the bestthing since sliced bread – the answer to my quest of riches.

    Alas, it did not work out that way. Covered calls are an intro to options. They are one strategy with pros and a lot of cons.

    For one thing, they have the same risk/reward as selling a naked put. Would you sell naked puts? No? You are taking the same risk when you do a covered call. But most hustlers of covered call “education” don’t bother to tell you this.

    Like a golfer has different clubs in his bag, you need to have different strategies in your arsenal. The covered call is just one of those strategies.

  3. SYED on December 31, 2009 at 3:54 pm

    What you are saying is true. But I only sell puts and do not buy and options or call. I Only sell put mostly on ETFS and sell puts of just couple of stocks. If I am wrong I will buy them cheaper. If I am right I will keep premium. I sell at 15% to 20% below market value of securities. what is your opinion?
    Also can you tell me what kind of stocks or ETFS you use to sell puts as you mentioned in your email. For example trades you did in last 3 to 4 months. I trust you will provide it so others can also read it and make mind to join you. Waiting for your answer! Thanks.

  4. MIKE LOOS on June 9, 2010 at 7:02 am

    Hello Alan,
    I agree that covered calls are risky in a volitle market
    What about stocks that are trending with low volume
    and little price flucuation? And sell say a higher strike
    with a realistic stop, take less of a profit but also
    take less of a hit? I still feel Credit spreads are
    the best hope to learn more as a new subscriber to
    OG on condors & butterflies and when to adjust them.
    Mike Loos Fla

    • Genius on July 2, 2010 at 11:57 am

      Every strategy has pros and cons. There is no one perfect startegy that works in all markets, all the time. But as traders, we continue to look for it. Credit spreads are good in trending markets, condors and butterflies are good in high volatility markets, calendars are good in low volatility markets, covered calls are good in stable markets in stable stocks.

      If you have a stock like Wal-Mart, you can do any of these strategies on it. Any DOW component stock can be a good candidate for option selling.
      Make sure though that there is enough liquidity in the options you are trading and that there is enough premium.

      For example, I own a stock in my retirement account called PBT – this is an oil and gas trust that pays out nice dividends, but the option premium is so low that it is not worth selling calls against my stock. Wal-Mart, McDonalds, IBM, Coke and other large companies are much better candidates.

  5. Gerald Wenzel on July 2, 2010 at 7:31 am

    I like Mr. Genius, I think He paved the way for us, and I,m listening and learning from His wisdom. Im not trading yet ,I don,t understand all the lingo but I would like to be a millionaire soon and help those that can,t help themselves.Gerald Wenz. Mendota

  6. Don Davis on September 22, 2010 at 8:51 am

    I am brand new to options, but I understand that selling weekly options is best as some claim to making double those trading monthly option. Cannot wait for your response.

    • Genius on September 22, 2010 at 10:46 am


      Weekly options are the hotest thing right now. And the option traders i know are still trying to figure out the best ways to profit from it. Yes, the returns can be better than on monthly options, sometimes better than double, but as with everything, there are drawbacks.

      1. You have to be really good at adjustments when you deal with weeklys. a single days move can screw up your trade and unless you know when and how to adjust and do it quickly you will get killed.

      2. You have to be able to watch the markets all day each day of the trade. A reversal could happen at any time.

      3. Since the time value is low, these trades are more commission intensive. So some types of trades may not work.

      4. These trades, even though they are the same concepts come with huge amounts of stress. Trade in size, and they will keep you up at night.

      I myself have been testing the weeklys and have made money each time I have done so. Was the 2-5% worth the intense stress? Not sure yet. I have done condors, butterflies, and calendars and they all work. But the condors worked best for me. but even then, it is long term game so you could make money several weeks in a row, but one major move will wipe it out.

      If you are new to options, stick with monthly trades until you can consistently make money on them. Weekly options are more towards gambling than trading.

  7. Anil on October 1, 2010 at 8:00 am

    Genius. I really agree with you that you are Genius. I am making reasonable amount of money in trading in Iron Condor in “NIFTY” Nifty Index Option of Indian Market. I want to improve my skill. Please do something for Indian Markets.
    U can see the charrt in icharts

    I am using OptionsOracle for analysing my probablities

    • Genius on October 1, 2010 at 1:17 pm


      I have no experience in Indian markets. What would scare me about them is that they are much more volatile than American markets. There could be huge moves up or down. That said, I will look into it.

      • Anil on October 1, 2010 at 11:08 pm

        As Indian markets are volatile , I don`t trade in stocks . I trade only in Index Options which are European Style.There may be huge moves of up in stocks but not in index.

  8. Merdy on August 20, 2011 at 8:28 pm

    Please explain what you mean by selling options. Are you reffering to owning the stock and selling options or are you selling naked ( not owning the stock), and what kind of account do I need to set up with my broker? Thanks.

    • Genius on August 22, 2011 at 10:27 am

      Both of the strategies you mentioned are selling option stategies. We do neither. Covered calls take up a lot of capital, and naked options are very dangerous. We mainly use spreads for our selling. To trade my way, you need a Level 4 account.

      • Dave Wenger on May 14, 2012 at 6:53 pm

        How do you get to the level four options all the brokerage houses will liet you trade are covered calls

        • Genius on May 15, 2012 at 11:09 am

          You have to ask very nicely. 🙂

          The brokers ask you several questions when opening an account – net worth, experience in option trading, etc. if you do not meet their qualifications they will only give you Level 1. Some brokers give everyone Level 1 unless you ask for higher levels. They do this to protect themselves. If you lose a lot of money in trades you dont know how to do, you can turn around and sue them. And many people have done this, so you have to show them you have experience before they will approve you.

  9. Jerry Jones on December 4, 2011 at 6:02 pm

    I love selling weekly options and I have had very good success! I sell calls every week on FAS and FAZ. I sell way out of the money calls on these etf’s. FAS and FAZ have very high implied volatility, so I get very good premium each week selling calls on these 2 etf’s. Last week I made $172.05 selling 2 FAZ calls and I made $25.43 selling 1 FAS call for a total of $197.48.

  10. kuldip sandhu on February 11, 2012 at 12:58 pm

    dear genius,i am new to GENIUS but i know some about options. my question is;when you adjust an IRON CONDOR do you adjust with iron condor or it can be adjusted with butter fly or calender spred or double calender or some other strategy and when to adjust an iron condor

    • Genius on February 13, 2012 at 2:42 pm

      The great thing about options is you can adjust using any combination of options. You can use all of the ones you mentioned and more. Just because you start with an iron condor does not mean you have to end with an iron condor. The end goal is to make a profit on the trade. it does not matter what your trade is “called”

  11. ramesh on March 27, 2012 at 4:31 pm

    can you provide us with more information on weekly options.


  12. JOHN on July 16, 2012 at 11:17 am

    JOHN G.

    • Genius on July 16, 2012 at 11:56 am

      Hi John,
      Selling naked puts is great if you have the money to buy the stock. if you dont want to buy the stock consider put spreads which will bring you less premium but will protect you from a large drop.

  13. GershonP on August 19, 2012 at 10:05 pm

    Question: Stock is ZN. Currently trading for +- $1.75.
    The Aug.5 puts @3,00 and Aug.7.5 @5,50.
    If I sold the Aug. 7.5 @ 5,50 would this be a
    good trade?
    I understand the I might have to buy the stock
    if it hits the 7.5 mark.
    My calculations: Stock @ $1,75
    Sell 1 Aug. 7.5puts @ 5,50
    Net $550,00 – commission.
    Am I seeing this correctly or puts only work
    when itm puts?

    I need clarification on this.

    • Genius on August 20, 2012 at 11:51 am

      The 7.5 puts are already in the money. If you sell these you will need to buy the stock at 7.50 a share.
      I think you are confusing selling puts with selling calls because these numbers dont make sense.

      if the stock is at 1.75 and the 7.5 puts is selling at 5.50, the trade would be losing .25 from the start. but what happened to the time value? the pust should be worth more than 5.50 for you to make any money.

  14. George on September 25, 2012 at 6:56 pm

    What is the minimum capital needed to utilize your Autotrade program ?

    • Genius on September 26, 2012 at 4:05 pm


  15. Ethan on August 4, 2018 at 10:00 am

    I sell OTM Cash covered Puts with a 2-3 month time frame, using only stocks that I would be glad to own at a substantial discount, and often with a much better dividend yield. This strategy provides me with a large premium as well. There are several other parameters that I also utilize to reduce risk. Very often, I will simply close out the position within a short time period like a week or less if the stock rises and I can pick up 30 or 40% of the total premium. Other times, I have needed to hold the option a bit longer. I can only remember one time where I was forced to buy the stock, and my premium covered the price loss. This method has worked for me about 88% of the time over the past two years. I applaud those who are successful with credit spreads of one sort or another, but for me, I just find them too complicated.

    • Ameen Kam on March 6, 2019 at 1:24 pm

      Your system should be working great because you are trading it in the middle of a 10 year bull market. When things get a little volatile, you will need to willing to act and b. change strategies because not all strategies work in all markets. But I am happy to see you are taking action and doing well.

  16. Kanyalal Bhatia on October 21, 2018 at 5:36 pm

    I am not new to selling commodity options past 2 1/2 years selling all sort of comm. energy,currency,grain,live stock et-all very successfully 2017 10 k account to 16.6 k ‘0’ loss selling c/p/strangles all naked , this year so far gain of 11.2 k with a small loss of $76.0 loss so far tis is most boring trading but pays very well at the sell 3-6-9 even 12 months out deep OTM wait to expire worth less I use schwab & Tos as broker comm. i pay $1.5 & $ 1 retrospectively both brokers don’t allow future options in IRA account,.
    To join OG is to learn more from u to utilize my spare time to see where u can take me , i trade only CME products stay away from ICE because of monthly fee of $150/month which not justify to my long term trading, hope this journey will be a good experience & worth while.
    I like to be casino/insurance com . not a player or a customer want to get paid up front and don’t mind waiting to be get paid.

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