Selling a put option on Robinhood is a bearish strategy where you agree to buy a stock at a set price if the seller exercises the option. You collect a premium for taking this obligation.
When you sell a put, you're betting the stock will stay above the strike price. If it does, you keep the premium. If it falls below, you may have to buy the stock at the strike price.
For example: Stock XYZ trades at $50. You sell a $45 put for $2. If XYZ stays above $45, you keep the $2. If it drops to $40, you must buy 100 shares at $45 ($4,500), even though they're worth $4,000.
There are two primary types of puts you can sell:
| Type | Risk | Reward |
|---|---|---|
| Cash-secured | Limited | Premium received |
| Naked | Unlimited | Premium received |
Traders sell puts for income generation or to acquire stocks at lower prices. The strategy works best in neutral or slightly bearish markets.
According to the Options Industry Council, put selling accounts for about 30% of all options trading volume. Many traders use it as part of their income strategies.
Another mistake is assuming you'll always be assigned. Most puts expire worthless, letting you keep the premium without obligation.
To sell a put on Robinhood:
I recently sold a put on a stock I wanted to own at a 10% discount. The trade executed quickly, and I collected $1.50 per share in premium. When the stock didn't drop below my strike price, I kept the entire premium.
Always understand the maximum risk before selling puts. For cash-secured puts, the maximum risk equals the strike price minus the premium received, multiplied by 100 shares.
The CBOE reports that put volume increased 15% year-over-year in 2022, showing growing trader interest in this strategy.