{"id":1800,"date":"2025-11-25T11:37:42","date_gmt":"2025-11-25T11:37:42","guid":{"rendered":"https:\/\/www.bearsavings.com\/blog\/?p=1800"},"modified":"2025-11-25T11:37:44","modified_gmt":"2025-11-25T11:37:44","slug":"does-selling-leap-puts-actually-work","status":"publish","type":"post","link":"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/","title":{"rendered":"Does Selling LEAP Puts Work? A Deep Dive Into The Strategy"},"content":{"rendered":"<div style=\"margin-top: 0px; margin-bottom: 0px;\" class=\"sharethis-inline-share-buttons\" ><\/div>\n<p class=\"wp-block-paragraph\">It is no secret among retail investors that selling LEAP puts is one of the most reliable ways to make money in the stock market over the long-term while also acquiring shares at a discount.&nbsp;In theory, it\u2019s almost too good to be true.&nbsp;You receive a large premium upfront, only buy the stock if it falls to a price you already like, and the trade can usually be rolled or tweaked as needed.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In practice, though, does it really work?&nbsp;Under what circumstances does it make sense for the average investor like yourself and I?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">As someone who has sold both short-term and long-dated options for years, I have witnessed firsthand how LEAP puts react in bull markets, choppy markets, and painful drawdowns.\u00a0This post breaks down the <a href=\"https:\/\/amzn.to\/4rj0Ngr\" target=\"_blank\" rel=\"noopener nofollow sponsored ugc\" title=\"\">rationale behind the strategy<\/a>, when it works, when it can burn you, and how you can use it wisely.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_89 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#What_is_a_LEAP_Put\" >What is a LEAP Put?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Why_Selling_LEAP_Puts_Can_Be_Extremely_Effective\" >Why Selling LEAP Puts Can Be Extremely Effective<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Large_premium_due_to_long_duration\" >Large premium due to long duration<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Your_desired_entry_price_is_not_arbitrary\" >Your desired entry price is not arbitrary<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#High_probability_of_a_profit\" >High probability of a profit<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Highly_effective_for_quality_companies\" >Highly effective for quality companies<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Effective_in_quiet_to_moderately_bullish_markets\" >Effective in quiet to moderately bullish markets<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#When_Selling_LEAP_Puts_is_a_Recipe_For_Disaster\" >When Selling LEAP Puts is a Recipe For Disaster<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#You_are_taking_on_equity_risk\" >You are taking on equity risk<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Speculative_stocks_can_collapse_and_never_recover\" >Speculative stocks can collapse and never recover<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Margin_or_large_cash_reserves_are_needed\" >Margin or large cash reserves are needed<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#High_volatility\" >High volatility<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Assignment_can_come_at_the_worst_time\" >Assignment can come at the worst time<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Does_the_Strategy_Work_Through_Market_Cycles\" >Does the Strategy Work Through Market Cycles?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Bull_markets_%E2%80%94_Yes_it_works_very_well\" >Bull markets \u2014 Yes, it works very well<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Sideways_markets_%E2%80%94_Yes_it_still_works\" >Sideways markets \u2014 Yes, it still works<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Bear_markets_%E2%80%94_Risky_unless_you_choose_the_right_stocks\" >Bear markets \u2014 Risky unless you choose the right stocks<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Realistic_Expected_Returns\" >Realistic Expected Returns<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Who_Should_Use_This_Strategy\" >Who Should Use This Strategy?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Selling_LEAP_puts_are_ideal_for_investors_who\" >Selling LEAP puts are ideal for investors who:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Selling_LEAP_puts_is_not_suitable_for_traders_who\" >Selling LEAP puts is not suitable for traders who:<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#How_to_Select_Stocks_for_Selling_LEAP_Puts\" >How to Select Stocks for Selling LEAP Puts<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-23\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Best_Practices_for_Selling_LEAP_Puts\" >Best Practices for Selling LEAP Puts<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-24\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Sell_further_out_of_the_money_not_greedy_strikes\" >Sell further out of the money, not greedy strikes<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-25\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Diversify_your_short_LEAP_puts_across_multiple_tickers\" >Diversify your short LEAP puts across multiple tickers<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-26\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Roll_early_and_often\" >Roll early and often<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-27\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Size_according_to_worst_case_scenario\" >Size according to worst case scenario<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-28\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Avoid_chasing_the_highest_premium_names\" >Avoid chasing the highest premium names<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-29\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Target_quality_and_liquidity\" >Target quality and liquidity<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-30\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#So_Does_Selling_LEAP_Puts_Work_The_Honest_Truth\" >So, Does Selling LEAP Puts Work?\u00a0The Honest Truth<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-31\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Comparison_Table_LEAP_Puts_vs_Short-Term_Puts_vs_Buying_Shares\" >Comparison Table: LEAP Puts vs Short-Term Puts vs Buying Shares<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-32\" href=\"https:\/\/www.bearsavings.com\/blog\/does-selling-leap-puts-actually-work\/#Final_Words\" >Final Words<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_a_LEAP_Put\"><\/span>What is a LEAP Put?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Before we jump into the mechanics and logic of selling LEAP puts, let\u2019s first define what one is.&nbsp;A LEAP put is a put option with an expiration more than 12 months in the future.&nbsp;LEAPs have a much higher time value component than short-dated options due to their long duration.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The process of selling a LEAP put means you are <strong>agreeing to buy the stock at the strike price anytime before expiry in exchange for the premium paid upfront<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Example:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Price of ABC $100<\/li>\n\n\n\n<li>You sell a 18-month $80 put<\/li>\n\n\n\n<li>Premium received is $12\/share<\/li>\n\n\n\n<li>Effective cost basis is $68 (strike \u2013 premium)<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">In this scenario, if ABC trades above $80 at expiry, the put expires worthless and you keep the full premium.&nbsp;If it falls below $80, you are assigned and you buy ABC at the effective price of $68\/share.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This is where some investors refer to it as \u201cgetting paid to wait\u201d.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p class=\"has-text-align-center wp-block-paragraph\"><strong><em><a href=\"https:\/\/amzn.to\/4pzojnO\" target=\"_blank\" rel=\"noopener nofollow sponsored ugc\" title=\"Learn The Wheel Strategy and Get Extra 15-20% annually\">Learn The Wheel Strategy and Get Extra 15-20% annually<\/a><\/em><\/strong><\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-medium\"><a href=\"https:\/\/amzn.to\/4pzojnO\" target=\"_blank\" rel=\" noreferrer noopener\"><img loading=\"lazy\" decoding=\"async\" width=\"200\" height=\"300\" src=\"https:\/\/www.bearsavings.com\/blog\/wp-content\/uploads\/2025\/11\/options-wheel-strategy-200x300.jpg\" alt=\"\" class=\"wp-image-1801\" srcset=\"https:\/\/www.bearsavings.com\/blog\/wp-content\/uploads\/2025\/11\/options-wheel-strategy-200x300.jpg 200w, https:\/\/www.bearsavings.com\/blog\/wp-content\/uploads\/2025\/11\/options-wheel-strategy-683x1024.jpg 683w, https:\/\/www.bearsavings.com\/blog\/wp-content\/uploads\/2025\/11\/options-wheel-strategy-768x1151.jpg 768w, https:\/\/www.bearsavings.com\/blog\/wp-content\/uploads\/2025\/11\/options-wheel-strategy-432x648.jpg 432w, https:\/\/www.bearsavings.com\/blog\/wp-content\/uploads\/2025\/11\/options-wheel-strategy.jpg 1000w\" sizes=\"auto, (max-width: 200px) 100vw, 200px\" \/><\/a><\/figure>\n<\/div>\n\n\n<p class=\"has-text-align-center wp-block-paragraph\"><strong><em><a href=\"https:\/\/amzn.to\/4pzojnO\" target=\"_blank\" rel=\"noopener nofollow sponsored ugc\" title=\"Learn The Wheel Strategy and Get Extra 15-20% annually\">Learn The Wheel Strategy and Get Extra 15-20% annually<\/a><\/em><\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_Selling_LEAP_Puts_Can_Be_Extremely_Effective\"><\/span>Why Selling LEAP Puts Can Be Extremely Effective<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">There are a few key reasons why the strategy is mathematically compelling.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Large_premium_due_to_long_duration\"><\/span>Large premium due to long duration<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Time value increases with duration.&nbsp;LEAPs are significantly cheaper than weekly or monthly options due to their extrinsic value.&nbsp;For high-volatility growth stocks, LEAP put premiums can range anywhere from 20 to 40 percent of the underlying share price.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That means thousands of dollars upfront per contract.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Your_desired_entry_price_is_not_arbitrary\"><\/span>Your desired entry price is not arbitrary<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Instead of waiting to buy the stock at a certain target price, you get paid to commit to that price now.&nbsp;If you only want to own the stock if it falls to a certain price, selling a LEAP put lets you guarantee that price.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"High_probability_of_a_profit\"><\/span>High probability of a profit<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The majority of LEAP puts will expire worthless because stocks tend to drift higher over the long-run.&nbsp;Even in range-bound markets, time decay works in your favour.&nbsp;The longer the duration, the more time you have for volatility to compress and for the stock to recover after temporary sell-offs.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Highly_effective_for_quality_companies\"><\/span>Highly effective for quality companies<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Selling LEAP puts against strong, profitable businesses with durable moats and predictable earnings is a great strategy.&nbsp;Such companies rarely go bankrupt, which reduces assignment probability.&nbsp;If you get assigned anyway, you become a shareholder at an attractive price.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Effective_in_quiet_to_moderately_bullish_markets\"><\/span>Effective in quiet to moderately bullish markets<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">During trending up markets or range-bound markets, the long-dated premium gradually decays.&nbsp;This works to the benefit of the seller.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"When_Selling_LEAP_Puts_is_a_Recipe_For_Disaster\"><\/span>When Selling LEAP Puts is a Recipe For Disaster<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">It is important to note that the strategy is not risk-free.&nbsp;In fact, it can be a recipe for disaster under the wrong circumstances.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"You_are_taking_on_equity_risk\"><\/span>You are taking on equity risk<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Selling a put is not a risk-free way to generate yield.&nbsp;It is, at its core, a bullish bet disguised as an income generating strategy.&nbsp;If the stock falls 40 to 60 percent, you lose big.&nbsp;The psychological pain of mark-to-market losses on LEAPs is usually more intense due to the large and early drop in value.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Speculative_stocks_can_collapse_and_never_recover\"><\/span>Speculative stocks can collapse and never recover<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Growth stocks, speculative tech, EV stocks, microcaps, pre-revenue stocks can all decline 70 to 90 percent in a down market.&nbsp;I have personally seen this with names like AMPX, SERV, as well as several small-cap AI and battery stocks.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you sell LEAP puts against such stocks, you are assuming the full downside.&nbsp;A premium that seemed like a bargain can be wiped out in a few days.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Margin_or_large_cash_reserves_are_needed\"><\/span>Margin or large cash reserves are needed<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">To sell cash-secured LEAP puts, you will need substantial capital.&nbsp;For instance, to sell a single $50 LEAP put, you need to reserve $5,000 in cash in your account.&nbsp;Some brokerage firms auto-assign early if you do not monitor your margin levels.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"High_volatility\"><\/span>High volatility<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">LEAP options contain a lot of extrinsic value, so a sharp volatility spike can cause your short put to instantly increase in mark-to-market value even if the stock price has not dropped much.&nbsp;This can lead to margin calls or forced early closes at a loss.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Assignment_can_come_at_the_worst_time\"><\/span>Assignment can come at the worst time<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Early assignment while undesirable is possible.&nbsp;This can happen around dividend distributions or deep-in-the-money scenarios.&nbsp;If volatility increases and you are unable to roll the option near expiry, it can force you to buy shares at an undesired time.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Does_the_Strategy_Work_Through_Market_Cycles\"><\/span>Does the Strategy Work Through Market Cycles?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Bull_markets_%E2%80%94_Yes_it_works_very_well\"><\/span>Bull markets \u2014 Yes, it works very well<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">During sustained bull markets, most LEAP put sellers make solid, consistent returns.&nbsp;Stocks grind higher, volatility contracts, and time decay works slowly in the seller\u2019s favour.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Sideways_markets_%E2%80%94_Yes_it_still_works\"><\/span>Sideways markets \u2014 Yes, it still works<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">During choppy markets, LEAP puts perform well too.&nbsp;The reason is the long time horizon allows for the stock to oscillate.&nbsp;As long as the underlying stays above your break-even price over time, you still profit.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Bear_markets_%E2%80%94_Risky_unless_you_choose_the_right_stocks\"><\/span>Bear markets \u2014 Risky unless you choose the right stocks<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Bear markets are the key inflection point where LEAP put sellers split into two categories:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Sell LEAP puts on only on well-established companies with deep balance sheets<\/li>\n\n\n\n<li>Sell LEAP puts on more speculative names for high premiums<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">The latter group tends to blow up their accounts.&nbsp;A stock like PayPal or AMD dropping 30 percent and rebounding is entirely possible.&nbsp;A stock like a pre-revenue EV or battery startup getting clobbered 80 percent and remaining down for years is also possible.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The strategy can work as long as you target the right companies.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Realistic_Expected_Returns\"><\/span>Realistic Expected Returns<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Historically, selling LEAP puts has yielded around 10 to 30 percent in annualized returns depending on factors like:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Volatility of the underlying<\/li>\n\n\n\n<li>Strike distance<\/li>\n\n\n\n<li>Market environment<\/li>\n\n\n\n<li>Rolling effectiveness<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">The returns are good but comes with full downside equity risk.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Who_Should_Use_This_Strategy\"><\/span>Who Should Use This Strategy?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Selling_LEAP_puts_are_ideal_for_investors_who\"><\/span>Selling LEAP puts are ideal for investors who:<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Want to own the stock long term anyway<\/li>\n\n\n\n<li>Have enough margin or cash cushion<\/li>\n\n\n\n<li>Can stomach drawdowns<\/li>\n\n\n\n<li>Likes systematic approaches<\/li>\n\n\n\n<li>Realize this is a bullish play, not risk-free income<\/li>\n\n\n\n<li>Know how to manage risk, diversify, and avoid high-risk premiums<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Selling_LEAP_puts_is_not_suitable_for_traders_who\"><\/span>Selling LEAP puts is not suitable for traders who:<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Expect guaranteed income<\/li>\n\n\n\n<li>Sell on highly volatile speculative stocks<\/li>\n\n\n\n<li>Trade on thin margin<\/li>\n\n\n\n<li>Cannot stomach assignment<\/li>\n\n\n\n<li>Get emotional when facing large paper losses<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_to_Select_Stocks_for_Selling_LEAP_Puts\"><\/span>How to Select Stocks for Selling LEAP Puts<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A simple heuristic that has served me well: <strong>Sell LEAP puts only on stocks you would happily buy 2 to 3 years down the road<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Ideal examples include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Large-cap tech<\/li>\n\n\n\n<li>Profitable mid-caps with strong free cash flow<\/li>\n\n\n\n<li>Businesses with sustainable competitive advantages<\/li>\n\n\n\n<li>Broad market ETFs<\/li>\n\n\n\n<li>Sector ETFs with long-term growth tailwinds<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Avoid:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Pre-revenue businesses<\/li>\n\n\n\n<li>High-leverage small-caps<\/li>\n\n\n\n<li>Meme stocks<\/li>\n\n\n\n<li>Extremely volatile stocks<\/li>\n\n\n\n<li>Businesses with suspect financials or deteriorating fundamentals<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">If the business is not sound, do not sell LEAP puts.&nbsp;The premium is never worth the risk.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Best_Practices_for_Selling_LEAP_Puts\"><\/span>Best Practices for Selling LEAP Puts<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Sell_further_out_of_the_money_not_greedy_strikes\"><\/span>Sell further out of the money, not greedy strikes<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Picking a strike 20 to 30 percent below current price gives you stronger protection.&nbsp;You get meaningful premium while limiting assignment.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Diversify_your_short_LEAP_puts_across_multiple_tickers\"><\/span>Diversify your short LEAP puts across multiple tickers<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Never have more than 15 percent of your portfolio tied up in one short LEAP put.&nbsp;Even large caps can suffer steep drawdowns.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Roll_early_and_often\"><\/span>Roll early and often<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Rolling three to six months before expiry gives you better control over the trade outcome.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Size_according_to_worst_case_scenario\"><\/span>Size according to worst case scenario<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">If the stock price tanks 50 percent, could you stomach being assigned?&nbsp;Can you hold if assigned without blowing up your margin account?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If no, then size down.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Avoid_chasing_the_highest_premium_names\"><\/span>Avoid chasing the highest premium names<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The highest premiums carry the highest risks.&nbsp;A 30 percent annualized yield is irrelevant if the business goes bust.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Target_quality_and_liquidity\"><\/span>Target quality and liquidity<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Liquid tickers give you better spreads, easier rolling, and smoother price action.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"So_Does_Selling_LEAP_Puts_Work_The_Honest_Truth\"><\/span>So, Does Selling LEAP Puts Work?\u00a0The Honest Truth<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">To summarize, selling LEAP puts is effective but only when you do so under the right conditions and with the right mindset and behaviour.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>It works when you:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Sell only on high-quality stocks<\/li>\n\n\n\n<li>Accept you may be assigned<\/li>\n\n\n\n<li>Size positions correctly<\/li>\n\n\n\n<li>Diversify<\/li>\n\n\n\n<li>Hold through volatility<\/li>\n\n\n\n<li>Manage margin carefully<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>It fails when you:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Chase premiums<\/li>\n\n\n\n<li>Sell on speculative stocks<\/li>\n\n\n\n<li>Have limited margin<\/li>\n\n\n\n<li>Panic during drawdowns<\/li>\n\n\n\n<li>Relies on the strategy as primary income source<\/li>\n\n\n\n<li>Expect all stocks to recover<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Over the long run, it\u2019s a great way to accumulate shares at a discount while also collecting option income.&nbsp;Professional traders and institutional investors use it for exactly this reason.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It\u2019s not for everyone.&nbsp;It takes discipline, risk management, and fortitude to ride out volatility.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Comparison_Table_LEAP_Puts_vs_Short-Term_Puts_vs_Buying_Shares\"><\/span>Comparison Table: LEAP Puts vs Short-Term Puts vs Buying Shares<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-table\"><table><thead><tr><th>Strategy<\/th><th>What It Is<\/th><th>Risk Level<\/th><th>When It Works Best<\/th><th>Pros<\/th><th>Cons<\/th><\/tr><\/thead><tbody><tr><td><strong>Selling LEAP Puts<\/strong><\/td><td>Selling puts with 12+ months to expiry<\/td><td>Medium to High<\/td><td>Stable or long-term uptrend<\/td><td>Large premiums, discounted entry, high probability of profit, flexible rolling<\/td><td>Large capital requirement, high mark-to-market volatility, full downside risk<\/td><\/tr><tr><td><strong>Selling Short-Term Puts<\/strong><\/td><td>Selling weekly or monthly puts<\/td><td>Medium<\/td><td>Quiet markets or range-bound trading<\/td><td>Faster time decay, more frequent income cycles, smaller drawdowns<\/td><td>Lower premiums, more frequent management, vulnerable to sudden volatility spikes<\/td><\/tr><tr><td><strong>Buying Shares Outright<\/strong><\/td><td>Purchasing shares immediately<\/td><td>Medium<\/td><td>Long-term holding with strong fundamentals<\/td><td>Simple, no margin risk, collects dividends, no assignment risk<\/td><td>No premium income, full upfront capital needed, must accept current price<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Final_Words\"><\/span>Final Words<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Selling LEAP puts is not a free lunch.&nbsp;It\u2019s a systematic way of expressing bullish conviction while also getting paid to wait.&nbsp;Used with the right discipline, it can outperform simple buy and hold.&nbsp;Used carelessly, it can lead to permanent loss of capital.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you are a long-term investor who loves picking up quality stocks at attractive prices, selling LEAP puts can be a great addition to your toolbox.&nbsp;Just keep in mind that premiums are never free.&nbsp;They are your risk price.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>It is no secret among retail investors that selling LEAP puts is one of the most reliable ways&#8230;<\/p>\n","protected":false},"author":1,"featured_media":1802,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[38],"tags":[],"class_list":["post-1800","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-making-money","article","has-background","has-excerpt","has-avatar","has-author","has-date","has-comment-count","has-category-meta","has-read-more","has-post-media","thumbnail-"],"aioseo_notices":[],"aioseo_head":"\n\t\t<!-- All in One SEO 5.0.5 - aioseo.com -->\n\t<meta name=\"description\" content=\"Learn whether selling LEAP puts is a safe and profitable strategy, when it works, the risks, and how retail investors can use it responsibly.\" \/>\n\t<meta name=\"robots\" content=\"max-image-preview:large\" \/>\n\t<meta name=\"author\" content=\"DA\"\/>\n\t<link rel=\"canonical\" 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