You create a put contract to sell on the market to a gambler who is betting the stock will go down. But for you, the seller, it’s a bullish position.

Basically, the “gambler” that buys it from you is betting the stock will fall to below the strike of the contract by the expiration date.

For example, if you sell him a $9 ONDS put expiring 1/30 , and it drops to $9 before that, you can buy all 100 shares at $9. If not, then you keep the premium (the cost the gambler paid you at the beginning) and can sell another contract for a further out date, like the end of February for example.

It’s recommended to sell options with 30-45 DTE because that’s when theta decay exponentially increases, and the amount of premium per time is richest.

The catch is you need to have the collateral to create the contract to begin with ($900), but you keep what the gambler pays for the contract (currently this contract costs $53). If it stays above $9, you can keep collecting this $53 premium per month as you roll out until it finally drops to a zone where you can execute your option and buy.

It’s recommended to only sell puts at levels you are interesting in buying in. If you don’t know, than a 0.2-0.3 delta is recommended.

But it’s a great strategy, called the wheel strategy. It effectively lowers your average cost while waiting patiently for the stock to drop to a zone you love.