Selling puts is one of the most practical ways to generate a steady income from the stock market — if you understand how to manage the risks. In this interview, veteran trader Lee Lowell explains his proven, conservative approach to selling puts safely and consistently. He shares how he finds trades, controls risk, and uses his signature “80% rule” to lock in profits.
Watch Lee Lowell explain his selling puts strategy
Lee Lowell
Lee Lowell is a veteran options trader with more than three decades of experience.
He began his career as a floor trader on the NYMEX in New York and later founded Smart Option Seller, an educational service that teaches retail traders how to generate income by selling put options in a disciplined, low-risk way.
He’s also the author of Get Rich with Options and known for his clear, no-hype teaching style that helps everyday traders use probability, patience, and proper risk control to win over time.
Why selling puts can be a safe, steady income strategy
Most traders think of options as risky or speculative, but selling puts can actually be one of the most conservative ways to trade.
When you sell a put option, you’re agreeing to buy a stock at a specific price in the future — and getting paid upfront for that obligation.
It’s essentially a way to get paid to place a limit order on a stock you already want to own.
If the stock never drops to your chosen strike price, the option expires worthless, and you keep the premium as profit.
If it does fall, you buy the stock at a discount — usually at a level you were happy to own it anyway.
This approach allows you to earn income while patiently waiting for quality opportunities.
Lee Lowell’s conservative approach to selling puts
In this interview, Lee breaks down how he sells puts safely, step by step — with a focus on simplicity, probability, and control.
1. Focus on high-quality stocks
Lee sells puts only on blue-chip, fundamentally strong companies — the ones you’d gladly own long term.
He avoids speculative names, low-priced stocks, and companies with volatile earnings histories.
This filters out much of the risk before a trade even starts.
2. Choose strikes well below market price
He prefers far out-of-the-money puts, typically 20% below the current stock price.
That gives a wide cushion between current levels and the strike price, meaning the trade can still be profitable even if the stock dips moderately.
3. Use expirations 1–3 months out
Lee sells options one to three months from expiration, where theta decay — time value erosion — accelerates.
This timeframe offers a balance between premium size and time risk.
4. The 80% rule
Lee’s signature move is the 80% rule:
Whenever a trade reaches 80% of its potential profit, he closes it early instead of waiting for expiration.
This simple rule locks in profits and avoids the last-minute surprises that can ruin a good trade.
5. Manage with rolling, not panic
If a stock moves toward the strike, he rolls the position — buying back the current option and selling another one at a lower strike or further out in time.
This extends the trade’s duration and often lowers the breakeven price while collecting new premium.
Returns, risk, and realistic expectations
Lee’s strategy is intentionally conservative. He targets 2–3% per trade on margin, which can compound to around 10–15% annually — without taking large directional bets.
He categorizes his approach as 1–3 on a 10-point risk scale, making it far less volatile than buying options or trading short-term spreads.
Key factors that keep the risk low:
- Trading only large, stable companies
- Avoiding earnings events
- Keeping plenty of cash or margin available
- Closing trades early with the 80% rule
“The goal isn’t to swing for the fences,” Lee says. “It’s to make steady, consistent income month after month.”
Here are some other income strategies:
- Paul Gundersen: The Wheel options strategy
- Dennis Maritim: Three options strategies for steady income
- Ed Kurtz: Unlock 4% extra returns with T-bills
The mindset behind successful put selling
Beyond mechanics, Lee emphasizes psychology and discipline. Option selling is a game of probabilities, not predictions — and success comes from repeating a sound process over time.
He warns against common trader mistakes like:
- Selling too many contracts
- Holding to expiration for the last few cents
- Ignoring position sizing or stock quality
According to Lee, the best traders are the ones who stay calm and consistent:
Who is this way of selling puts best suited for?
Lee’s conservative system works best for traders who:
- Want steady income rather than speculation
- Are comfortable owning strong companies at lower prices
- Prefer probability-based trading over prediction-based bets
If you already sell covered calls, adding put selling on the front end of your strategy can help you earn premium both when entering and holding a position — a technique sometimes called “the wheel.”
The book recommended in this video
Lee recommends his own book as an introduction to four great strategies for beginner options traders.