Trading Anyone earning income from writing options?

Curious if anyone else is doing similar. I always planned to spend time doing this but never really got the time until I stepped back from crypto trading and stopped taking on paid work. Having more time allowed me to study the methods of others and see how this can really work.

I've only started doing it this year, but happy to share my progress over time if anyone is interested.

The strategy I'm using increases returns IF these conditions are true:
1. You have a view that the market is not going to boom, is going to be fairly flat or only slightly up. Note:
a) If the market DOES boom like crazy, money will still be made but it will be capped a certain amount
b) If the market goes down for the year, money will still be lost but it will be less than what is lost for the portfolio in buy & hold mode
2. You don't mind selling your current shares in 30-45 days time as long as the price is slightly higher than it is now
3. You don't mind buying shares in specific companies in 30-45 days time, at a price that's lower than today's price
4. You don't mind holding shares in bundles of 100 shares (US options are 100 shares per 1 contract)

PART1 - Covered Calls on existing share portfolio:
A) Sell a call option on shares you own at 30-45 days to expiry, with a strike price above todays price around the 30% delta level.
Example shares: SPY Index fund, 100 shares owned worth $43,700 based on todays price of $437 per share.
Example option: 1 contract for Apr 14 Expiry (45 days), strike price of $453, the contract value is $5.85 per share (so 1 contract pays $585)

If the option gets exercised by the buyer I MUST handover my shares and they will pay $45,300 ($1600 higher than current value). If the share price is greater than the strike price on the night of the expiry date it will be automatically executed by the owners broker almost always.
So in the case of the share price going up past the strike I make $2185 ($1600 capital gain + $585 option premium) which is a 5% return in 45 days. If the price goes up but doesn't exceed the strike I get to keep the premium of $585 AND keep the shares, then can move on to open the next option for more premium at a higher strike price and further date. If the price goes down I still keep the premium but have some unrealised capital loss on the shares (the same loss as if buy and hold), in a way the premium cushions the blow of losing money because premium is being earned every 45 days.
If volatility remains constant, thus option premium remains constant, that's approximately an extra 10% annual income on top of the shares capital gain + dividends. If closing at 50% profit this return can be quite a bit higher.

B) To increase returns - you can close the option position as soon as it gets to within a certain profit target (eg 50%). This allows you to move straight onto opening a new 45 day contract and collecting the next premium. The reason this works is because the possible profit is capped at a fixed amount (eg $585 in the example above). If $585 is the maximum possible profit, and you achieve 50% of that in the first 3 days out of 45 days, then why would you wait the extra 42 days just to get the other 50%; It is more efficient to take the 50% profit, and write a new option for 45 days.
For example 3 days after you write the contract, the SPY goes down by 10% due to a European power invading a neighbouring country or something.. The share price going down makes the option worth less because it's further away from the strike price, so you can buy it back for a fraction of what you received when selling it (writing options means you've shorted an option).

PART2 - Cash Secured Puts on potential share buys:
This part means you have a watchlist of shares you have researched and want to buy, but you prefer to buy them at a cheaper price and/or you're not in a hurry to enter the position. It's also useful if you have alot of positions you want to enter but not fussed about which particular one you enter or when you enter it.
Unlike Part1 though, you don't have shares to cover the option (puts would technically need you to be short the shares to be covered); BUT you can still be secured by having the cash available to purchase the shares if/when the option gets exercised.
It's called a "cash secured put" because you either have a portion of cash in your account available or cash elsewhere + some margin. Some do it naked but that's another story and involves more risk management and doing other things for "insurance" that adds complexity. Many people don't like cash sitting there doing "nothing" but in my opinion it's not doing nothing if this strategy is earning income, in addition having a bunch of cash is fantastic after any market downturn as is buying a bunch of shares at a lower p[rice and benefiting from a bounce.

A) Sell a put option at 30-45 days to expiry, with a strike price below todays price around the 30% delta level.
Example option: 1 contract for Apr 14 Expiry (45 days), strike price of $418, the contract value is $8.69 per share (so 1 contract pays $869)

B) To increase returns you can close the position at 50% profit for the same benefits explained in part 1.

If the SPY goes down and the option gets exercised by the buyer I MUST buy 100 of their shares for a total of $41,800 ($1900 lower than current value). If the share price is less than the strike price on the night of the expiry date it will be automatically executed by the owners broker almost always.
So in the case of the share price going down past the strike I must acquire more SPY shares at a cheaper price than the day I made the decision that I wanted them (though at higher price than the current market value on exercise date) but I still keep the premiums I earned from selling options for however long it was done before it got exercised. This premium income largely cushions the pain of being assigned, because on top of that you can start selling covered calls straight away after taking ownership of the shares (ie back to part1).
Regardless of whether the option gets exercised, $869 every 45 days is a 16% annualised return. If closing at 50% profit this return can be quite a bit higher.

If you had 50/50 covered calls and cash secured puts the return would be somewhere between the two maybe 13-14% income, and then you add any capital gain to that. In practice though most people don't wait until expiry and close at 50-80% profit which boosts returns above 20% or more from what I've seen. The 2 processes force you to buy low sell high so there's normally some capital gain, but if SPY goes to the moon you'll be capped at a maximum percentage per 45 day period based on volatility affecting pricing - in example part1 above that would be 5% every 45 days, or if you close more often when in profit maybe 5% cap per month.

Currently volatility is high, so premiums are decent. If the market gets really boring then volatility and income go lower.
Volatility can be tracked with the VIX https://yhoo.it/33RMhq2

Doing this with individual stocks or with more risky things pays much higher premiums, though you need to diversify across many positions in that case because you don't want to take ownership of a large position after something crashes (eg Facebook recently).

It's NOT a passive income, it's certainly very active. Taking profits can be done automatically by limit "take profit" orders, but once you do take profit you want to use that spare capital to put on another position the next day to keep the funds working for you.

The reason it works is not some "free money glitch", you're actually giving something away for this income. You're providing insurance in the case of the put options, and people are willing to pay for that insurance to hedge their positions. The time value that decays quite fast over those 45 days it what pays you in the end.
In terms of the call options, people that are shorting need to buy them for insurance.. and then there's the wallstreet bets crew that are just plain gambling on the upside. Put insurance is alot more popular right now as you can see by the difference in premiums received above, but you also need to have cash for that which doesn't earn dividends like the covered calls do.
The cost of the insurance you're provide is at the extremes - in the case of outsized moves to the upside your capital gain for the month is capped, in the case of outsized moves to the downside, you have to take a portion of someone else's losses.

There's alot of nuances and individual preferences to this strategy depending on ones own portfolios, spare time and risk tolerances. I find it very fitting to my strategy of diversification of income, especially in a year where we don't believe in an outright bull case anymore.