Options traders can choose from countless spreads, combinations, and adjustments. But after years of teaching and trading sophisticated strategies, Schultz believes one of the simplest approaches can provide the foundation for an entire portfolio: selling puts.
How Dr. Jim is selling puts
Jim Schultz
Dr. Jim Schultz has a PhD in finance and spent roughly a decade at Tastylive, where he became a familiar face to retail options traders. He recently left Tastylive and now runs his own Options Uncapped YouTube channel.
Over the years, Schultz says he has spoken with thousands of traders, including many who have built much of their portfolios around selling puts in major market indexes such as SPY and SPX.
His conclusion? Traders may spend too much time searching for something new and sophisticated when a simpler strategy can do much of the job.
Why selling puts?
A short put is a bullish options position. The trader sells a put option and receives a credit upfront.
Schultz sees three important forces working for the trader.
First, there is positive delta. If the underlying rises, the short put generally benefits.
Second, there is positive theta. As time passes, the option loses extrinsic value, all else being equal. That decay benefits the option seller.
Third, selling puts creates negative vega. If implied volatility falls, the value of the option tends to decline, again helping the seller.
This combination becomes particularly attractive during a rising market. The trader may benefit simultaneously from higher prices, the passing of time, and declining volatility.
Schultz also likes the volatility skew found in equity options. Out-of-the-money puts often carry relatively rich implied volatility because investors are willing to pay for downside protection. For a put seller, that can mean collecting more premium.
How Jim finds trades
Schultz starts with liquidity.
He prefers heavily traded stocks and ETFs with high volume and tight bid-ask spreads. Rather than searching for obscure opportunities, he wants to trade the same liquid products that many other traders are already using.
The second major filter is volatility.
He uses Implied Volatility Rank, or IVR, to compare current implied volatility with its range over the previous 12 months. As a premium seller, Schultz prefers situations where volatility is elevated.
Around 30 IVR is an important reference point for him. Above 30, he becomes more interested in selling premium. Very low IVR readings make the opportunity less attractive.
His preferred DTE and delta
Once Jim has found a liquid underlying with attractive volatility, he turns to expiration and strike selection.
For selling puts, he generally prefers 30 to 60 days to expiration. He believes this provides a useful part of the option decay curve without moving into the much faster and potentially more difficult behavior of very short-dated options.
For strike selection, his normal starting point is around 30 to 35 delta.
His broader range is roughly 25 to 45 delta. He may move toward the lower end if he wants to be more conservative or toward a higher delta when he wants more bullish exposure.
One thing he does not like is selling extremely low-delta puts simply because they have a very high probability of expiring out of the money.
Jim argues that these trades can look deceptively safe. The premium collected is small, and a sharp market decline can cause delta, vega, and higher-order Greeks to work aggressively against the position. Traders may also be tempted to sell multiple contracts because each trade requires less buying power.
For Jim, the additional risk is often not worth the small premium.
Taking profits when selling puts
His basic profit rule is simple:
Take the trade off at 50% of maximum profit.
If he sells an option for $3, for example, his normal target would be to buy it back around $1.50.
He sees little reason to chase the final portion of the premium all the way to expiration, when gamma and directional risk become increasingly concentrated.
If the trade has not reached the 50% target, Schultz starts paying particular attention when there are around 14 to 21 days remaining.
A meaningful profit at that point may be enough for him to close the trade rather than continue holding it.
What happens when the trade goes wrong?
This is where Jim’s approach becomes more discretionary.
He personally does not enter every short put with a fixed stop loss. Instead, he evaluates losing positions case by case and considers them in the context of his overall portfolio.
For traders who want a more mechanical approach, he says managing a loss around two to three times the credit received can make sense.
But his preferred tool for many losing trades is time.
If a short put is losing with roughly 14 to 21 days remaining, Schultz will often roll it into a later expiration rather than simply close it. That can bring in additional premium, improve the breakeven, and potentially allow the trader to adjust the strike.
The goal is to give the trade more time for the market’s longer-term positive drift to work.
Assignment is not necessarily the end
Another reason Jim likes selling puts is the possibility of accepting assignment.
If a short put moves deeply against him, he can take delivery of the shares rather than automatically closing the option for a large loss.
That does not mean assignment is harmless. It makes underlying selection and position sizing especially important.
Jim argues that this feature becomes particularly attractive when selling puts on broad indexes or ETFs that the trader would be comfortable owning anyway.
He does not automatically turn an assigned position into a Wheel trade either. If the stock has fallen well below his assignment price, selling a covered call may provide very little premium unless he sells the call below his cost basis. In that situation, he may simply hold the shares and wait.
Position sizing matters
Selling naked puts can create substantial downside exposure, particularly when the entire market falls.
Jim therefore emphasizes keeping positions small. As a general guideline, he suggests using roughly 3% to 5% of account value in buying power for an individual position.
That is an important part of his overall philosophy: selling puts may be simple, but it should not mean taking oversized risk.
What returns are realistic?
Jim does not maintain results showing the performance of his short puts separately from the rest of his portfolio.
But when asked what a capable trader might realistically achieve using only a short put strategy, he points to long-term stock-market returns as a reference.
His view is that an experienced trader may be able to achieve market-like returns with less risk, or somewhat higher returns with a similar risk profile. He suggests that 13% to 15% annualized returns from a well-executed short-put approach do not seem unrealistic to him.
That is not a promise. It is his assessment of what may be achievable with sufficient skill, discipline and appropriate risk management.
And that may be the biggest takeaway from the interview: selling puts is simple to understand, but successfully building a portfolio around the strategy still requires careful selection, position sizing and management.
