Q: I just wanted to clarify your option selection criteria…I believe you said you only wanted to sell an option which was at least 4 strikes out of the money. Is that correct? Also, were you looking for a certain monthly percentage return in exchange for your risk?
A: we sell “puts” at least 4 steps “out of the money”, we sell “calls” for whatever turns a profit in the position. If it got “Put” to us for $10, we want to sell the $11+ Call, for example.
This strategy used to average 7% per month, but the market has tightened up, so we are doing slightly less than that now.