Free tool
Options income goal calculator
How much money do you need to make $500 a month selling options? It depends on what your cash earns each month. Enter a goal and a monthly return, and this shows the account size it would take, with a cash reserve set aside.
Example numbers are filled in. Change any box and the results update. Educational only, not financial advice.
How the numbers work
- Cash working in trades: your monthly goal ÷ your monthly return. At 1% a month, every $100 of income takes $10,000 of cash securing puts.
- Cash in reserve: money you don't put to work, so a bad month or an assignment doesn't squeeze you. I keep at least 12% of my account in cash.
- Account size needed: cash working ÷ (1 − reserve). It's the total you'd need to have.
- Your account would make: if you enter your own account size, what it would earn at the same return after the reserve.
What return is realistic?
Over the last 12 months, my wheel has averaged about 1.6% a month on the cash I commit to it, roughly 19% a year. That's premium collected on large, profitable companies, at 0.15 to 0.25 delta, not total return. Some months are lower, and shares I own can be down while I wait.
Higher returns are possible, but they come from more risk: strikes closer to the stock price, or stocks that swing more. If a number looks too good, it usually is. See how I pick trades in Part 4: A real wheel strategy example, and my rules, and how to start with less in Part 6: The wheel strategy with a small account.
Questions
How much money do I need to make $1,000 a month selling puts?
At 1% a month on cash secured, about $100,000 working in trades, or about $114,000 with a 12% cash reserve. At 2% a month it is half that, but with noticeably more risk.
Is 1% to 2% a month realistic for the wheel strategy?
My own wheel has averaged about 1.6% a month on quality stocks over the last 12 months, counting premium collected. It isn't guaranteed. Some months pay less, and a falling market can leave you holding shares below what you paid.
Can I live off selling options?
Some people try, but it takes a large account and steady nerves through bad markets. Most people are better off treating it as extra income first and building from there, while keeping a cash cushion.