Last updated April 2026 — revised for clarity.
You never have to worry about market direction when you follow these guidelines, selling CALL and PUT options simultaneously. You can profit from price movements whether the market goes up or down.
Selling options on both sides can be a profitable strategy in trading. By simultaneously selling a CALL option and a PUT option, you can profit from price movements whether the market goes up or down.
Stocks generally increase in the long term. It's known to average around 12% per year. However, this article is for traders who buy stocks for short periods.
No matter what happens, what the charts show, what's going on in the world, or how a stock traded yesterday, the market always has a 50% chance of going up or down from its present position.
Many people hope to profit when a stock price rises. Any movement of a stock's price always has a 50/50 chance of going up or down. So short-term stock traders can't be right more than 50% of the time.
But you can use a strategy to profit both ways. It's done with stock options to set up non-directional trades with a credit to collect premiums.
Instead of buying or selling stocks, the method that puts the odds in your favor is to sell "premium." That is the value people place on fear and greed. They are willing to pay more in hopes that they are right.
That is where you come in. You sell into that fear or greed. The buyer is willing to pay a higher premium to indulge in their fear or greed. Fine. Sell it to them. I'll explain how in a moment.
Selling "premium" is done with options. But it's important to give you a quick description of stock options in case the idea is new to you.
There are two kinds of options: a PUT and a CALL.
People who buy a PUT option on a stock hope it will go down. This option gives the buyer the right to sell the stock at the agreed price (the strike price). Remember, you are not the buyer.
People who buy CALL options hope the underlying stock will go up. This option gives the buyer the right to buy the stock at the agreed strike price. Once again, you are not the buyer.
Since you are the seller (also known as the writer), you receive a premium for writing the option. You can buy and sell options just like you buy and sell stocks.
When you sell an option, you are making a contract that obligates you to let the buyer put the stock to you or call the stock from you if the stock price moves past the agreed strike price. That's why options are called PUTs and CALLs.
Options are contracts to buy or sell a stock at a particular strike price for a limited period. After that time, they expire.
Okay, this is where you might say, "Forget it! Options are dangerous!" You are right. Most people lose when they buy options because the premium on options tends to decay as they get closer to expiration.
However, I'm not talking about "buying" options! I'm talking about "selling" options.
When you sell an option to open a trade, you collect the premium. There is no rule against selling first and buying back later. When you sell first, you are selling short. That is why it's known as opening the trade.
The trade is closed later when you buy the option back or let it expire. That will become clear as we continue.
Since options tend to lose value, the premium you sold decays, and you keep the difference. That's known as premium decay, and it's where the profit comes from.
You can buy back your short option position at a lower price or let it expire, in which case you keep the entire premium you received.
The option becomes worthless if the underlying stock never goes below the strike price. Remember, that's what you want to have happen.
I like to use the following analogy to make this clear.
Imagine you sell insurance. You sell someone car accident insurance for a term of six months. They pay you a premium for that, and as the six months go by, the value of that insurance contract goes down.
By the time the six months are up, and the driver has never had an accident, the premium has decayed to zero. The insurance is worthless. The driver can't come back to you and say, "I never had an accident, so I want my premium back."
Selling a PUT option is like selling insurance. The buyer pays a premium for an option that allows them to sell their shares to you at an agreed price in case it falls below that price.
So, if the stock never goes below that price by the expiration date, the option expires worthless, and you keep the premium received.
How do you make that work no matter which way the stock moves? That’s where understanding a neutral trade becomes important.
You can sell premium on both sides at the same time—above and below the stock price. You do that by selling a PUT and a CALL option at the same time.
Whenever you sell a stock, option, or commodity you don't own, it's considered selling short. You are obligated to buy it back later.
In the case of options, you may not always have to buy them back. You could let them expire worthless and keep the entire credit you received as profit. But sometimes it's best to take a small profit when you have it. More on that later.
If the stock goes up or down, the option premium on either side will decay to zero.
If the stock stays between the two extremes you sold options on, then both sides decay to zero.
Even if the stock price moves past one side or the other, the premium erosion can work in your favor as long as it's not an extreme move. But there is a way to manage extreme moves, as I'll explain.
If you sell the option far enough above and below the stock price, you reduce the chances of losing on the tested side (the side that's going against you). That means you can actually make money from both sides.
That's what I mean by making a neutral trade. It won't matter if the stock goes up or down. That strategy is known as a "Short Strangle."
As I explained above, a "Short Strangle" involves selling a CALL above the stock's strike price and a PUT below the strike price.
The nice thing about selling options short is that even when you are a little wrong, the premium can still decay because the option tends to lose value as it approaches expiration.
Professional options traders get to appreciate that. You can't ever be a little wrong with stocks and still make money. But with selling options short, decay of the premium works in your favor.
I'm not saying you can't lose with this method, but the wider you make your strikes, the less chance there is for the stock to move that far in the time you give it. I usually sell options with a 30-day expiration period.
In addition to deciding on the probability of profit, you can define your risk by setting up a trade in such a way as to lock in how much you can lose in the worst case.
You do that by buying cheap options (as insurance) with a higher strike price. That type of trade is known as an "Iron Condor" when you do it on both sides.
The difference between the strike price of the option you sell and the option you buy (called the spread) locks in the maximum loss. That is how you define your risk.
In other words, in addition to selling insurance, you are buying your own insurance to limit your losses in case things go against you and get way out of hand.
The following table shows the strategy for both trade types I discussed here. There are many more.
| Type of Trade | Method | Risk |
|---|---|---|
| Strangle | Sell PUT and CALL | Unlimited |
| Iron Condor | Sell PUT and CALL, and buy protective PUT and CALL | Limited by spread |
I previously mentioned that options can expire worthless, allowing you to keep the full premium without needing to repurchase them. However, I do not recommend waiting for that to happen.
Even though the suggested time period for each of these trades is only around a month, things can still go wrong. The best and proven method is to buy back the options at half the price at which you sold them. That means you close the trade when you have a 50% profit.
It's less risky when you are not greedy. Keep that in mind. It took me years to learn that, and it helped tremendously. Who cares if you make less money as long as you can repeat the successful trades 95% of the time? Right?
There are several benefits to doing this:
Another reason for closing a trade early (at 50% gain) is that your risk remains the same for the second half of the ride, but you can only get another 50%. That's why it's better to free up your capital that was at risk and use it for another trade.
Remember that when you buy a stock, you risk 100% of your capital for the entire time you hold that stock. In addition, at any point, that stock has only a 50% chance of going in one direction—hopefully up.
When you sell options above and below the strike price of a stock, you increase your probability of profit, and you can even define how much risk you take by buying lower-cost options for protection.
Now you know how to do non-directional trading to profit no matter if the market goes up or down.
If you got this far, let me know with a thumbs-up.
