Makes sense 
does it mean that you have to keep 50k cash always available and “locked” until 2030?
Thanks so much for all your explanation! How often do you check for such potential value reductions? I’m asking to get a sense if this is more like a buy-and-hold strategy or a day trading strategy.
Well, if you’ve already written an option then it shows up (at your bank, online) in your portfolio. You can check it any time you want.
Sometimes the option loses value faster, sometimes slower. In general, value mainly reduces shortly before the expiration date.
In any case, what I do here is absolutely not day trading. I rarely write short term options (the premiums are too low; too much work) - i.e. days/weeks long expiration dates. Even 3-6 months expiration dates is rare for me.
On Monday’s I look at my portfolio and the market and document trade ideas. On tuesday I execute max 1-2 trades. Sometimes I’ll skip a week. This is manageable, low stress, and generates enough income to live off of (although I have a sizeable equity/cash portfolio so that helps).
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“does it mean that you have to keep 50k cash always available and “locked” until 2030?”
I don’t because UBS has a sizeable equity+cash portfolio from me which acts as collateral. So I can (if I were to wish to do so) put all my cash into stocks and write options (both covered call and puts) in addition with certain limits. I consider options writing my yield enhancement strategy in addition to dividends. It allows me to live off of dividends while still investing (in growth and dividend stocks) with option premiums - in simple terms.
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Yes, this I understand. A complete beginner question: don’t you have to compare the option with the underlying to understand if the option has fallen value?
Again, from a beginner’s perspective, I understood the term ‘short’ as referring to selling an option (i.e. selling a call or selling a put), whereas the term ‘long’ seemed to refer to buying an option (i.e. buying a call or buying a put). But you seem to use ‘short’ and ‘long’ to refer to the expiration of the option.
Thanks again for your explantions and insights. This makes perfect sense to me.
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No, you don’t. It automatically shows up clearly in your portfolio overview (online, with your bank).
Example (oversimplified)
- Stock has price of 100
- I write a put option expiration date december 2026, strike price 80 and let’s say i get 10 as premium
- That 10 gets credited to my regular cash account and at the same time the option shows up in my equity portfolio as (10) => net total assets stay the same
- Now, imagine the stock rises to 110 as we get closer to December… then I still have 10 in my cash account (unless i spend it of course) but the option will reduce in value (incl. time decay) e.g. to (6) because the odds of it being in the money have reduced. Your bank would show that as “40%” gain. THis is dynamic of course until the expiration date.
I only consider buying back (and rewriting) an option if I’ve gotten >80-90% of the value from the option and even then mostly I just let them expire rather than spending cash to buy it back and close the position.
I did not use the words short or long at all.
- Write a put => get a premium for obligation to buy a stock at price X on date Y
- Write a call => get a premium for obligation to deliver a stock at price X on day Y
- Buy a put => pay a premium for right to sell a stock at price X on day Y
- Buy a call => pay a premium for right to buy a stock at price X on day Y
If you are still educating yourself on Options fundamentals, then I recommend not trading them. You may want to consider doing some purely paper trades to track how it develops, learn and only then step into the real market. Options (especially naked written ones) can be financially very dangerous. 99.99% of my options trades are writing covered calls (I own the stock but am willing to sell for x% higher than current price) and writing cash secured puts (I’d like to have the stock but at a lower price).
Unless you have substantial experience, do NOT write naked calls in particular… as you’ll be taking a tremendous risk.
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All this content is extremely valuable!
Only thing would be the direction of the options, in terms of bull and bear what I’d seen before was:
- buying a call > bullish
- selling (writing) a call > neutral to bearish
- buying a put > bearish
- selling (writing) a put > bullish
I guess it’s clear now, but I’m rather used to long and short for stocks, related to buy and sell (to achieve positive or negative balance).
For options, you buy an option to have the option to buy or sell. To sell one (someone else has the option) is also called “to write”
Now “short-term” here is the time frame, and depends: it could mean expiration tomorrow or in a month, and the premium for many stocks or whole index will be small.
I understood he’s going for expiration in months, even years ahead. 
Well, OP didn’t mention safe. And if you plan to buy, anyway, it is actually not that unsafe. Biggest risk would be lost opportunity.
So Butch’s option writing is a valid (if non-conventional and not beginner friendly) strategy on how use idle cash…
Yeah the other posts follow-up on options, not idle cash, but an old, idle threat can suffer as much 
In my case that’s not necessarily the case. I may be bullish on a stock but willing to sell it if it for instance increases from 100 to 120 (e.g. guesstimate of fair value, level where I’m comfortable switching to another stock with more potential, etc.). I write call options in such a case not because I am bearish/neutral but because I’m happy to be paid for the chance of having to sell when it hits a price point I’d have been happy to sell at anyway. In a way, it forces discipline to not fall too much in love with a stock so you hold on to it hoping for a bit more gains.
Similarly, selling puts isn’t necessarily because I am bullish. Often I’d love to have the stock, am not willing to buy it at the current price, and am fine being paid to wait just in case it drops.
Considerable effort goes into this though - I maintain a tracker to ensure quarter end options are more or less balancing out. In general 80% of options wind up out of the money thus not exercised and I aim for that to be a bit higher AND for written puts (i.e. cash out for me) to be offset by written calls (i.e. cash in for me) to avoid a big cash hit.
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Fair point.
Keep in mind, you can also write options on some fairly safe ETF’s… i.e. giving potential to
- hold the cash
- get option premium
- potentially buy that ETF at a discount vs. current price
To me it’s absolutely crazy what is recommended here for a cash position. And the risks are severely downplayed.
There is no free lunch in investing. Period.
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and my highlights. It did imply to me the money is eventually going to be invested.
Please consider the option writing is not what I’d do, nor recommend a beginner. But it’s a valid point discussing, even if it’s only a mental exercise.
Under the premise that they want to invest in given fund or stocks eventually, write puts somewhat below today’s price, what can actually happen? Compared to investing everything at once, or (as was asked indeed) just park it:
- Price goes up: You missed out on the gains, but that’s taken into account with delaying investing. At least you’d still have pocketed the premiums
- Price below today, but above strike price: Waiting paid off. You get to buy cheaper and you’ve got the premiums
- Price down significantly. Ok, you lost on that option trade, that’s the risk. That risk is always there when investing. But you’re still better off compared to buying today (due to set strike price). Plus, the premiums.
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Yes, eventually, that’s the whole point.
If they don’t want to invest that money in the stock market at the moment, option trading would be illogical.
Let me explain:
If they wanted to bet on the price going up, they could just buy the ETF today (without paying additional option trading costs). - Which is exactly what they don’t want to do, which is why they are holding cash in the first place.
And the reason why they are holding cash in the first place is because they are DCA’ing their initial investment in case the price falls, and this potential upside is smaller if they hold options.
In the end it comes down to lump sum vs DCA investing on the beginning of an investing journey.
If the OP has decided to DCA, why propose to them a way to reverse engineer lump sum’ing with options. It’s not logical.
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What’s not logical about generating premiums while you wait and get to acquire the equity at a lower price?
There is no free money in options; that premium is just payment for taking on risk. If the stock completely crashes, you are legally obligated to buy it at the higher agreed-upon price, meaning you catch a falling knife and lose way more than the premium paid you. On the flip side, if the stock rockets to the moon, you don’t actually own it. You keep your tiny premium, but you miss out on all the massive gains. You are taking on all the downside crash risk while completely capping your upside potential.
Or are we not talking about cash-secured puts?
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Your post reads like a text book… yet there is a global derivatives market (incl. options) of roughly 1 quadrillian.
I understand the argument you’re making but find it intellectually lazy. You describe a ‘what if’ scenario aligned with your view yet conveniently forget all the ‘what if’ scenarios not aligned with your view.
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It’s not logical because it is incongruent with what the OP is doing in the first place: DCA into the market.
It’s all explained in the post you’re citing.
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Fair enough, let’s look at the “what-if” scenario I left out: the stock stays completely flat or drops just a tiny bit. In that specific case, you are 100% right. Selling puts works beautifully, you collect the premium, and maybe get the stock at a slight discount. That’s the exact scenario you are betting on.
Nobody is arguing that cash-secured puts are a bad strategy. It’s a great strategy in a sideways market. The original point still stands, though: it fundamentally isn’t Dollar Cost Averaging, and the premium isn’t “free”, it’s literally just your financial compensation for absorbing the downside risk that the options buyer is paying to get rid of.
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