Here Are 4 Options Strategies You Can Try Right Now to Earn Extra Income

For professional traders, paying close attention to the market’s everyday price swings is generally a full-time commitment. For casual traders with day jobs that make it difficult to follow the markets, there are a number of trading strategies available that allow you to generate income while having a day job elsewhere, and they entail selling options.

Unlike buying options, where traders usually try to speculate on an imminent price move, strategies for selling options are aimed at generating periodic income and often benefit from the passage of time. The best options brokers make selling just as easy as buying. In this article, we’ll introduce you to four popular strategies for earning extra income selling options.

Low-Maintenance Options Strategies for Generating Income

There are a number of strategies that traders can use to produce periodic income from options. Next, we’ll introduce you to four popular strategies that do not require a lot of time and effort maintaining each trading position.

Cash-Secured Puts

A put option is a contract that gives the buyer the right, but not the obligation, to sell a specific amount of an underlying security at a predetermined price within a specified time period. A put option increases in value as the underlying stock or security’s price decreases. Conversely, put options decline in value as the price of the underlying stock increases.

A cash-secured put is an strategy where an investor sells a put option while setting aside enough cash to buy the underlying stock if assigned. It’s typically used when the investor is willing to buy the stock at a lower price. If the option expires worthless, the seller keeps the premium as income. If assigned, they buy the stock at the strike price, potentially at a discount. 

Benefits include generating income, entering positions at preferred prices, and managing risk through a defined cash reserve. It’s ideal for long-term investors seeking both downside protection and opportunity.

• Best scenario: a trader sells put options on a stock they wouldn’t mind owning, and the price stays above the option’s strike price at expiration, allowing the trader to keep all the money received for the put.
• Key risks: the stock price drops and is below the option strike price at expiration. The trader must then buy the stock, not at the market price, but at the strike price of the option.

Covered Calls

A call option is a contract that gives the buyer the right, but not the obligation, to purchase an underlying asset at a predetermined price before a set expiration date. The value of a call option increases as the underlying stock or security’s price decreases. Conversely, call options decline in value as the price of the underlying stock increases.

While most people think of call options as a kind of lottery ticket used to score a jackpot from an explosive price rally, selling covered calls is a strategy designed to cash in when a stock’s upside trajectory is expected to slow or transition sideways. A trader that owns 100 shares or more of a stock can generate additional income by periodically selling call options to willing buyers and keeping the premium each time. 

Collars

This strategy combines buying a protective put and selling a covered call simultaneously.  The put option insures against big price drops, and the call option provides income. This is a low-risk, low-reward strategy.

• Best scenario: the stock price drifts higher and closes just below the call-option strike price at expiration, allowing the trader to keep both the premium and the shares.
• Key risks: the trader may lose money if price drifts only a little lower, but remains above the put-option strike price. Opportunity cost also occurs if the stock makes a runaway move higher and the collar caps the gain and forces the shares to be sold at a lower price at expiration.

Calendar Spreads

When a trader sells a shorter-term option and buys a longer-term option at the same strike price, it is known as a calendar spread. To execute this trade, income traders typically select a strike that is out of the money (calls for a bullish trade, puts for a bearish trade). Similar to a covered call, a trader can repeatedly collect premium each month (or every week if the stock has weekly options available) so long as they are holding a longer-term option.

The Bottom Line

Selling options has the potential to generate extra income trading, even for those with a full-time job in an unrelated field. Strategies like cash-secured puts, covered calls, collars, and calendar spreads offer defined risk, potential income, and flexibility—especially when paired with quality stocks. That said, traders should fully understand trade mechanics and underlying risks, before entering such positions.