[Short Put Strategy] 3 Entry Tactics to Increase Profits & Win Rate

all right alrighty So today we're going to be talking about this shot put and I'm going to be sharing with you three entry tactics to help you increase your profits and your win rate as well so let's go through very quickly what is a short put so a short put is a neutral to bullish strategy where you're selling a put option and then receiving a premium for it so this is a premium selling strategy and as the seller of the put option you have the obligation to buy a hundred shares of the underlying stock per

option contract if you exercise all right so this is the p l graph of the shot put so as you can see for the shot put we have a kept profit so this is our Max profit regardless where the market goes to right it can go as high as it wants but this is the max profit that we have and as you can see down here this is our strike price so anything after our strike price you can start to see that our profits are starting to decrease and if it goes past the break-even price

this is where we start to lose money so the break-even price is very simply calculated by the premium which we receive minus the strike price of the option we choose which you are selling right so as much as possible when we enter into this uh shot put we want the market to just go anywhere that is above our strike price so let's say for example if the current market is here and we sold our put option at this strike Price Right the market can go anywhere from here right ideally from here all the way to

here and would still be in a profit all right so let's get to the tactics all right so the very first tactic uh is to find support levels so support levels you can find them uh in an uptrend in the downtrend and in a sideways market so first of all in an uptrend so an uptrend basically is when the market is moving uh like this so basically what it's doing is forming what you call higher highs and higher lows as well so this is in in uptrend market so basically what we are looking for is

for support levels basically of the previous lows so this previous lows can act as support levels if the market was to come down and then bounce off it right so this is what we are looking for we're looking for a break of the previous low and then we can see if the market does go up and close above the previous low then this could be a good place for us to get into the shot put so this is for the uptrend now for downtrend the market moves in the opposite fashion right so instead of moving

uh making higher highs and higher lows is actually making lower highs right and lower lows so what we're doing down here is we are also looking for the break of the previous low all right so we want to see a break of the previous low and then we want to see that the market tries to go up and closes above this and ideally we want to have some bullish price action here right it can be a bullish uh Candlestick bar or maybe some Divergence which you see uh if we have some indicators going on below

which I'll share with you later on so this is what we're looking at right we're looking for this break of a previous low and for the price to close above before we can start to enter into a shortcut position and the last is the sideways market right so the sideways market is when the market has no defined uh real movement right it doesn't make higher highs you make this higher lows higher highs lower lows lower highs all right like this so you can see although it's making higher higher lows down here it made lower low

again all right higher highs then lower highs so it's in this back and forth action so what we want to look out for ideally is looking for all these previous lows to see where it breaks right we want to look for the lowest point and I basically draw a line over here all right around all these support levels and let's see whether the price can close above all these levels before we start taking uh into a short put position so let's take a look at some chart examples right so this is an uptrend as you

can see the market is trying to form what you call the higher highs higher lows right so can you identify where could be a good support level right so these are previous lows all right so you can see the the price section has not broken below this previous low but it came pretty close down here right so it came down all right it bounced off this uh previous low and then it went back up all right so this place is a good place for us to enter into a shot put position especially also because you

see it bounced off this moving average so moving averages can also serve as what you call Dynamic support right they are not static like price levels they are more dynamic because they move along with the price and you'll notice that many times when the price actually bounce uh touches the moving average it can bounce off so this can support uh use as a dynamic support as well so especially if you use this in conjunction with the support levels of the previous lows you can see that this can be a very good place for us to

identify strong places where the market will bounce back up right so this is in an uptrend now what about for a downtrend can you identify the support levels all right so as you can see there are there are a few support levels here I can draw one down here all right let me just draw this all the way across and then another support level down here so as you can see uh when there is a a break of the previous low from down here you can see that the price would momentarily just go up right

it goes up come back down bounce off goes back up again so again we can sell our shot put below this uh support level because when the price goes up your shot put will also lose its value which means to say you're in profit right because if you sell for let's say two dollars and as the price goes up it may depreciate to maybe around one dollar and that's where you can get your profits right so you'll see down here support very easily became resistance levels right resistance levels so since we are only looking for

a support where we are because we're going for a shot put which is a bullish strategy we're looking for this right so you can see again support level it tries to break below but then it bounced up again down here is another place where it very closely about to hit the support level and then it bounce back up again so again these are good places for us to get into this shot put right what about sideways right you can see this sideways has no real direction right it's forming this higher high but then after that

it starts to form lower high and you can see that down here it forms a higher low but then it goes down to form this lower low so you can see this is in a a sideways fashion right just moving between just these two prices up here right so during this time we can easily find all these support levels let me just draw this uh remove this first so I can draw it more accurately so you can see that it actually bounced off the support level quite a number of times all right so it bounced

off uh three times after uh he has broken this previous low so you can see this sideways is a pretty good time for us to get into a sharper position as well and selling our strikes below this support level right tactic number two so technique number two is to find oversold conditions using this stochastic indicator right now there are a few other indicators that can identify overbought or oversold conditions but the one that I like to use is stochastics and you can see that each time when the market right this this uh blue line down

here goes below this purple line it's what you call a oversold condition so oversold conditions basically are places where there's a higher potential for the market to bounce back up than it is to go down right so you can see two times when the market right has an oversold reading the market goes up at the same time you can use this in conjunction with Dynamic support levels or just the support levels right you can see this became resistance this is resistance now it became support all right so this is a moving average Dynamic support so

whenever you see that there's oversold in conjunctions with some of these support levels it can be a very good place for us to get into a shot put position as well so here's another one right so you can see each time it is uh oversold right you can see there are three times so again oversold right it bounced back up momentarily again down here as well it bounce back up down here as well bounce back up okay now one thing to understand is that this is not 100 going to work all the time right there

are times where it's going to show an oversold reading and then the market just continues to go down so what we are dealing with here is probability because if you want to get into a sharper position we ideally want the market to quickly go up in our favor right so would you rather sell it when it's oversold the shot put or would you sell it when it's overbought right so it makes more sense for us to time it when the market is oversold all right here's another example right as you can see this is the

chart from before where we have all these support levels right where it tries to break the previous support levels and then the market will bounce back up so you can see that each time when it bounce back up or rather when you touch the support level it coincide with the market the stochastics of saying that it's oversold right so you can see here this is pretty accurate because the four times right it showed an oversold reading right the market bounce back up except maybe this one time all right it showed this and then the market

just came back down after that right but for the most part it is pretty accurate especially when the market is going sideways all right so technique number three is one standard deviation so uh I don't want to get into the very technical term so in layman terms basically one standard deviation just depicts the price movement range that the stock will be in 68.2 percent of the time by the options expiration date based on the implied volatility okay that's quite a mouthful but basically what it's trying to say is that most of the time if you

can take a look at this uh highlighter box down here most of the time the market right or the underlying stock will be in between this box at the options expiration date right so if you're wondering how far or how wide you know the the stock has a range right how high it can go or how low you can go it's dependent on the implied volatility right sometimes there's earnings or sometimes there's some news that comes out so this implied quality will take into consideration that will Define the price uh range of the stock right

so basically what it's trying to say is that if you were to stick within this one standard deviation right uh of your you're choosing the strike price at around one standard division most of the time the stock will go in between will stay within uh this box so as you can see for short put we actually have a very high uh win percentage if you were to have a strike price at the one standard deviation all right so we want to go for a strike price that is around the 16 Deltas so around 16 Deltas

or anywhere 15 to 20 Deltas is fine as well that is where we have a one standard deviation uh put option right so you can see that although it's 68.2 percent most of the time it will stay in within four hours as a put option we have a 84.19 so there's almost 85 percent win rate right because anything above this point is also a profit for us so that means anywhere both from this point all the way to here is a profit so that is why when you want to choose a put the strike price

you want to choose around this one standard division to give you an increased chance of winning okay so let's put it all together now you can go individually for each of the tactics or you can combine all three of them together so if you combine three of them together what you want to do is you want to look for support levels then you want to look for oversold conditions and then once this two is present you wanna you wanna go for the shot put strikes which have roughly a 15 to 20 Deltas which is around

the one standard deviation Point all right so let's take a look at some examples so as you can see from here this is the same chart from before right so what do we look out for right we look for a break of the previous uh low which serves as support levels all right and then you you coincide this with a oversold reading so you can see now we have tactic one tactic 2 present here so the last thing you need to do is sell a one standard deviation strike price for the put options so maybe

it will be somewhere below down here right maybe it's 180 175 and then we will we will sell our put option here so as you can see it does not get to reach our put option the market goes up bounce back up after that and you can choose to take profit if you want if you realize quite a big profit on your shot put rather than wait for it to to expire right so here's the next example again so this is a downtrend right you can see the market is moving downwards and then there is

this support level all right tested the support level and then over here right there is an oversold reading so which is down here and then this is where you can sell right a one standard deviation shot put right one SD so you can see the market after that starts to go up all right another chart as you can see there are a number of examples here so same thing as well so for this this is also a downtrend so first identify the support level so I found the support level down here all right now look

for an a break of the support level so there is a break of the support level down here and then let's take a look at our stochastics so this is oversold all right so our first two condition has been met then now we sell another one standard deviation short point all right let's take a look at another example so as you can see all this is very similar again this is another stock this is Microsoft so same thing break of the previous support level all right break up the previous support level right and then we

look for the oversold condition right it matches here and then we sell a one standard deviation shot put so as you can see it never really went down so during this time the option will be decaying and you can pretty much take profit right here's another one so you can see break of the previous low as well it broke twice right so let's see which is the one that has the Overstock conditions this oversold condition so this is my oversold wait for it to close above the previous support level and then we can place a

one standard deviation shot put alright one last example down here so again let's look for support levels right the low down here right this does not have a low so it did not really break anywhere so let's take a look at maybe this one so this one it went down below there is an oversold reading right it broke the previous low and then it closed above it so so this is where we can get into a one standard deviation uh shot put string all right guys so I hope this video has been helpful for you

in helping you identify better entry uh timings for you to enter into your shot put so that you can have a better chance of winning so if you found this video helpful I'd appreciate if you give me a thumbs up and also subscribe so I can create more videos like this for you and as always thank you for watching I appreciate your time and made the options favor you