How to Sell Put Options: Step-by-Step Execution Guide

Selling put options is one of the most straightforward ways to generate income from the options market. Unlike buying options (which can feel chaotic with fast price moves), selling puts forces you to slow down, plan ahead, and think about assignment risk. That discipline is exactly what makes this strategy so effective for traders building a consistent income stream.

Here's what we're covering: the core mechanics, why DTE matters, and a step-by-step execution checklist you can follow right now.

What Does "Selling a Put" Actually Mean?

When you sell a put option, you're taking on an obligation: if the stock price falls below your strike price by expiration, you'll be forced to buy 100 shares of that stock at your chosen strike price.

In exchange for accepting that risk, the buyer pays you an upfront premium. That premium is your income, and it's the only real money you keep regardless of what the stock does.

Let's use a concrete example. Say XYZ stock is trading at $50/share.

• You sell one $48 put contract, collecting $2.00 in premium ($200 total)
• Expiration is 30 days away
• Your maximum profit: $200 (the premium you keep if XYZ stays above $48)
• Your maximum loss: $4,600 (you buy 100 shares at $48 = $4,800, minus the $200 premium collected = $4,600 risk if XYZ crashes to $0)

The stock can move up, down, or sideways. As long as it stays above your strike by expiration, you pocket the full premium.

Why DTE Changes Everything (and Why You Should Care)

Here's the hidden variable that separates consistent put sellers from frustrated traders: days to expiration (DTE).

Theta—the "time decay" of options—accelerates dramatically in the final 7-14 days before expiration. This is gift to put sellers. A $0.50 premium that decays slowly over 45 days might evaporate in just 3-4 days when you're 7 DTE.

The DTE playbook for put selling:

• 45-60 DTE: Sell puts here to collect decent premium for a reasonable wait time. You're collecting maybe 1-2% of the stock price in premium.
• 21-30 DTE: Sweet spot for rolling rolled positions forward or taking fresh trades. Premium collection is solid, theta decay is starting to accelerate.
• 7-14 DTE: Theta is working hard for you now. Your position profits quickly. But volatility spikes if things go wrong.
• 0-6 DTE: Theta is at maximum acceleration. Profits can happen overnight. If you're assigned, it happens immediately.

The best put sellers don't fight this calendrical reality—they build their strategy around it. You sell further out (45-60 DTE), watch theta decay do the work, and then either take profits early or roll the position to a later expiration to keep collecting premium.

Step 1: Choose Your Stock

This isn't about finding the next hot ticker. You're looking for stocks you wouldn't mind owning if assignment happens.

Screening rules:

• Liquid options: You need at least 200 contracts in open interest at your chosen strike. Illiquid options mean wide bid-ask spreads that eat your profits.
• Fundamental quality: No penny stocks or companies with upcoming earnings surprises. You could be assigned and stuck holding shares.
• Implied volatility: Higher IV = fatter premiums. Look for stocks that have elevated volatility (unusual news, sector rotation, macro uncertainty).
• No earnings in your window: If earnings land 10 days before your expiration, volatility will collapse and your premium evaporates. Avoid the ambush.

Real example: You're interested in selling puts on Microsoft (MSFT). Current price: $430. Open interest on the 35 DTE, $420 put: 850 contracts. IV rank: 62%. No earnings until April 24. This passes the screen. You have a candidate.

Step 2: Select Your Strike and Expiration

Here's the core tension: tighter strikes (further OTM = safer, less premium) vs. wider strikes (closer to the current price = more premium, higher assignment risk).

The put seller's framework:

1. Decide your acceptable assignment price. What price makes you comfortable buying 100 shares? For Microsoft at $430, maybe you'd buy at $410 because you think it's a solid price. That's your strike.
2. Check the delta. A -0.30 delta put (on a 100-point scale where -1.00 is nearly certain assignment) gives you roughly a 30% statistical probability of assignment by expiration. That's a reasonable risk for good premium.
3. Pick your DTE. For most traders, 30-45 DTE is the sweet spot. You get meaningful premium without holding for ages.
4. Calculate the annualized return. Premium collected ÷ margin/capital at risk ÷ days to expiration × 365. If you're collecting $200 on a $4,100 obligation over 30 days, that's roughly a 17.6% annualized return. Is that enough? For most traders, yes.

Example strike selection:

• MSFT at $430, selling the 30 DTE, $410 put for $1.50 premium ($150 total)
• Delta: -0.28 (28% statistical probability of assignment)
• Capital at risk: $41,000 (strike × 100) minus premium collected ($150) = $40,850 effective risk
• Return: $150 / $40,850 over 30 days = 13.2% annualized. Good trade.

Step 3: Place Your Sell-to-Open Order

This is where the rubber meets the road. You're actually placing the trade.

For Interactive Brokers:

1. Navigate to the options chain for your chosen stock
2. Right-click on the put strike you've selected
3. Choose "Trade"
4. Select "Sell to Open" (not "Buy")
5. Enter your order:
   • Quantity: 1 contract (= 100 shares)
   • Order type: "Limit" (not market—protect yourself from slippage)
   • Price: Bid-ask midpoint, or slightly better. If bid is $1.00 and ask is $1.10, try $1.05.
6. Select your time in force: "Day" (expires at market close) or "Good Till Cancelled" (stays open for 30 days)
7. Submit

For TD Ameritrade / thinkorswim:

1. Open the Analyze tab and find your stock's options chain
2. Right-click on the put strike and choose "Sell to Open"
3. Set your limit price (again, midpoint or better)
4. Review the position impact: Make sure your account has enough margin for the risk
5. Confirm and submit

For Schwab StreetSmart Edge:

1. Click on the options chain for your stock
2. Select the put strike and left-click "Sell"
3. Choose "To Open" (not "To Close")
4. Enter your limit price and execute

Pro tip: If the bid-ask spread is wide (say, $0.90 bid, $1.20 ask), you might place your limit at the ask price rather than the midpoint. Your order might not fill immediately, but you avoid leaving money on the table.

Step 4: Manage Your Position Post-Trade

Once you're assigned the obligation, you stop being passive. Here's your management timeline:

Days 0-3: Let theta decay take over.

Watch the premium value drop. Your P&L will likely swing slightly negative if the stock dips, but that's normal. Don't panic.

Days 4-14: Evaluate your exits.

• Take profits early: If your position is up 50% or more, consider closing it. Buy the put back at a lower price and pocket the difference.
• Still comfortable with assignment? Let it ride.

Days 15-21: Decide on rolling vs. closing.

If the stock hasn't crushed through your strike and you still want exposure:

• Close the trade by buying the put back (Sell to Close in reverse), pocket profits, and move to a fresh trade with a later expiration
• This is called "rolling" and it's your mechanism for continuous income

Days 21-0: Final stretch.

• If assigned, be prepared to own the shares
• If not assigned, the contract expires worthless and you keep 100% of the premium

Step 5: Plan for Assignment (If It Happens)

If the stock closes below your strike at expiration, you get assigned. On the next business day, 100 shares appear in your account at your strike price, and the premium you collected offsets your cost basis.

Example:

• You sold the $410 put for $1.50 ($150 premium)
• Stock closes at $405 on expiration day
• You're assigned 100 shares at $410
• Your actual cost: $410 - $1.50 = $408.50/share

Now you have several paths:

1. Hold the shares and sell covered calls against them (perfect entry point for the covered call strategy)
2. Sell the entire position if you're uncomfortable holding
3. Use them as the foundation for a covered call ladder, resetting your income stream indefinitely

Most experienced put sellers plan for assignment because the entry price is so favorable. You got filled at a price you were willing to buy at, and you collected premium for being patient. That's a win.

Key Execution Checkpoints

Before you sell any put, run through this mental checklist:

• Stock passes fundamental quality filter (liquid options, solid company, no imminent catalysts)
• Strike selected matches your acceptable assignment price
• Delta is between -0.20 and -0.35 (20-35% probability of assignment)
• DTE is 30-45 days (sweet spot for premium collection and theta decay)
• Annualized ROI is at least 12-15%
• Your broker supports limit orders (don't use market orders for options)
• You've calculated your maximum risk and it fits your portfolio
• If assigned, you have a follow-up plan (hold, sell, or roll into covered calls)

The Discipline Payoff

Selling puts isn't flashy. There's no big win story. But it's mechanical, repeatable, and it works because you're collecting premium from buyers who are afraid of missing moves and willing to pay for that insurance.

The traders who build real wealth in options execute this playbook dozens of times, refine it based on what works, and stop fighting the calendar. That's how you move from "occasional profits" to "consistent income."

Start with one contract on a stock you already like. Watch the theta decay unfold. Get comfortable with assignment. Then scale to 2-3 contracts across a small portfolio. The income compounds quietly, and six months from now you'll wonder why you didn't start sooner.