Short premium
Definition · Level 3 · Spreads & short options
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Being a net seller of options: you collect money up front and profit if the options lose value through time decay, falling implied volatility or the stock staying away from your strikes.
Example
“We run a short-premium book — mostly put spreads and condors.”
Where Tradecraft teaches it
Level 3 · Spreads & short options, in the lesson “Selling options: short puts & the wheel”: Why uncovered selling usually needs a higher approval level, the short put, cash-secured puts and the wheel.
Related terms
- Cash-secured putSelling a put while holding enough cash to buy the shares if assigned, typically strike × 100 (some brokers count the premium toward it), so no…
- Short PutSell a put and collect the premium. You are paid to promise to buy 100 shares at the strike if the stock falls below it.
- The wheelIncome cycle: sell cash-secured puts; if assigned, sell covered calls on the shares; if they are called away, start again with puts.
- BodyThe middle strike of a butterfly, short in a long fly — where a long fly earns the most at expiration.
- Breakeven win rateHow often a trade must win just to net zero, treating each outcome as a full win or a full loss: max loss ÷ (max profit + max loss), i.e. 1 ÷ (1 +…
- Broken-wing butterflyA 1×2×1 fly with one wing further from the middle than the other (e.g. +95C −2×100C +110C); cuts or removes risk on the near-wing side and adds it…