Active trading in stocks offers many opportunities for traders. Regardless of whether you are a trend follower riding medium to long-term uptrends, using breakouts from sideways phases for long entries or making tactical countertrend trades – the possibilities are very diverse. However, anyone who focuses on the most stable stock market income needs a different approach that is very similar to the insurance business: options trading.
Become a kind of insurance company!
Let’s start right away with the change of perspective in options trading: Instead of being on the buyer’s side, we switch to the seller’s side and thus essentially act as an insurance company that offers protection in return for a corresponding premium. Similar to large insurance companies, we only insure against potential dangers if the probability of such a risk is relatively low and the premiums more than compensate for the damage in the long term. It can be proven mathematically that the whole thing works because insurance prices are usually too expensive.
The core idea of this investment strategy: we let time work for us! Because every option has a fixed term, which has a negative impact on the buyer of the option in the form of a daily decreasing time value – this is of course an advantage for us as an insurance company. If, as an option seller, you select stocks that offer very high insurance premiums because the implied volatility is high, you will have attractive returns with already high hit rates, which makes trading much more psychologically relaxed.
Free online conference on options trading on December 14, 2025
Short Put practical example on Arista Networks (ANET)
But let’s just look at a current example of how a trader can generate attractive and, above all, relatively consistent returns by selling options. The short put is considered the simplest and best-known strategy for bullish market phases. The procedure is simple: We sell a put on a stock that has a positive trend and should therefore have a stable to rising price trend over the course of several weeks. For this purpose, we also select values that have already undergone a correction and are now oversold. With the classic oscillator such as RSI (Relative Strength) this can be easily and effectively filtered out with a value of less than 40. The following example shows the Arista Networks share as of November 24, 2025.
Fig. 1) Arista Networks share with SMA 200 and RSI (stock screener) Source: ezzy.io
Once we have identified an attractive stock, the second step is to select the appropriate put option that we would like to sell. With the express mode of the ezzy screener, this can be done in no time:
Fig. 2) Arista Networks share with short puts (express mode) Source: ezzy.io
We choose put #3, which has a maturity of 52 days and a strike price of $105. By selling this put, we are committing to purchasing 100 Arista Network shares for $105 until expiration if the put buyer exercises their right to exercise. For taking on this risk, we receive a premium of approximately $260 for a 52-day term. Sounds like very little, but annualized we can achieve a return of around 17% pa with this business (based on the required capital amount of USD 10,500) – even if the share price (which is currently trading at around USD 122) does not rise at all or even falls slightly.
But what exactly happens after the put option has been sold? There are two scenarios:
– If the stock remains above the strike price of $105, it makes no sense for the option buyer to exercise his put. The put expires worthless at the end of the term and we have made a profit of USD 260 and can use our freed up capital again for a new trade. The policyholder (the put buyer), on the other hand, has lost his premium.
– If, on the other hand, the share falls below the strike price (also called strike) of USD 105 and the put buyer exercises his right to sell, we receive 100 shares in the portfolio at a purchase price of USD 105 – regardless of where it is then listed. This risk should always be kept in mind. On the other hand, one thing is certain: the shot put is never worse than a direct stock investment if the stock falls – after all, our purchase price is reduced by $2.6 per share due to the premium collected.
However, the tendering of shares is relatively rare: In practice, most options traders buy the put back at a profit of 60-70% (based on the premium received) in order to avoid unnecessary risks shortly before expiry. If the put is trading at a loss due to a sharper decline in the share price, traders can either exit using a stop loss or roll into a new short put to give the position even more time and breathing space, which means that many trades can still be maneuvered into the green area – a specialty that only exists in opiton trading.
Thousands of underlying values, strikes and expirations – the screener does the work
If you consider how many combinations arise from the interaction of the underlying value, term and strike in options trading, it quickly becomes clear that integrating a screener into the trading routine creates many advantages: The screener not only increases the consistency and efficiency of the workflow, but also significantly reduces the susceptibility to errors in our investment decisions. This systematic approach and accuracy contribute significantly to ensuring long-term success on the stock market and creating a solid foundation for sustainable capital growth. The key advantage lies in the completely objective application of the pre-determined criteria, which can be both technical and fundamental. In contrast, with a manual search there is always the risk of being unconsciously influenced by tips from various media or of always only analyzing your own list of favorites – the result: less return and many missed opportunities.
Another risk of manual searching is that during difficult market periods, investors tend to select stocks that do not strictly meet their actual criteria. A screener, on the other hand, remains relentless in such situations and may not provide any results at all. This may seem frustrating at first, but it protects users from adding inferior stocks to their portfolio out of impatience or frustration, which could cost returns in the long run.
Risk notice
This article is the personal opinion of the author. It serves as information only. These analyzes should not be interpreted as investment or wealth advice. An investment decision regarding any securities or other financial instruments requires background knowledge of your personal situation, which the author does not know. This content is out of date and will not be updated after publication.
Every investment involves risks. Every investor should check, if possible with the help of an external advisor, whether these financial instruments are suitable for their personal situation. Winnings made on a demo account are not a guarantee of future winnings. Using leverage involves the risk of losing more than the total amount of the account. You are not required to use leverage.
