How I Generate Monthly Income Selling Puts on Futures (Step-by-Step)

How I Generate Monthly Income Selling Puts on Futures (Step-by-Step)

What if I told you there's a way to generate consistent monthly income from the market that most retail investors don't even know exists?

A strategy that gives you:

• Higher lyield with less capital

• No risk of early assignment

• And the ability to trade nearly 24 hours a day

Today I'm going to show you exactly how I use futures options to generate premium income — specifically by selling puts on the /ES mini futures.

My favorite setup? 45 days to expiration, 12 delta. Let me break down exactly why this works and how you can do it too.

Why Futures Options?

If you've been selling covered calls or cash-secured puts on stocks, you're leaving money on the table. Here's why futures options are superior for income generation:

No Early Assignment Risk

When you sell puts on stocks, you always have the risk of early assignment — especially around dividends. With futures options, the exercise style means you don't have that problem. The options expire to a 30-second VWAP of the underlying future.

Capital Efficiency

The margin requirements on futures options are significantly lower than stock options. You can control a large notional value with a fraction of the capital.

Nearly 24-Hour Trading

Futures trade almost around the clock. If news breaks overnight, you're not waiting until the market opens to react.

My Favorite Strategy: /ES 45 DTE, 12 Delta

Let me walk you through my bread-and-butter trade.

The Setup:

• Underlying: /ES (E-mini S&P 500 futures)

• Days to Expiration: 45 DTE (days to expiration)

• Delta: 12 (approximately 88% probability of expiring worthless)

• Strategy: Sell naked puts

Why 45 DTE?

This is the sweet spot where theta decay starts to accelerate significantly. You're collecting substantial premium while giving yourself enough time for the trade to work out if the market has a temporary pullback.

Why 12 Delta?

A 12 delta put has roughly an 88% probability of expiring out of the money. That means statistically, you keep the full premium 88% of the time. It's far enough out of the money to survive normal market volatility, but close enough to collect meaningful premium.

The Numbers (Example Trade):

Let's say the /ES is trading at 6,000.

Now that yield varies based on implied volatility. When the VIX is higher, premiums are richer. When VIX is low, premiums compress.

Important Note on Contract Size:

One /ES contract is $50 times the index value. At 6,000, that's $300,000 notional exposure. This is a leveraged instrument — you need to respect that.

If that's too large for your account, consider the Micro E-mini (/MES) which is 1/10th the size — $5 multiplier instead of $50. Your buying power requirement drops to around $1,500 per contract.

More Premium Opportunities

The /ES isn't the only game in town. Here are other futures markets where put selling works well:

1. /CL - Crude Oil Futures

Crude oil has high implied volatility, which means richer premiums. But it's also more volatile, so position sizing is crucial.

2. /GC - Gold Futures

Gold is less volatile than crude but still offers decent premium. Good for diversification.

3. /NQ - Nasdaq 100 E-mini

Higher beta than /ES, so you get more premium but more volatility.

4. /RTY - Russell 2000 E-mini

Small caps have higher implied volatility, making this attractive for premium sellers.

When to Be Aggressive vs. Conservative

Here's where strategy meets portfolio management.

I use the VIX as my guide for how much capital to allocate to options selling:

Why This Framework?

When the VIX is low (below 13), premiums are thin and the market is complacent. That's when you want to be defensive — hold more cash.

When the VIX spikes (above 25), that's when fear is highest and premiums are fattest. Paradoxically, that's when you want to be aggressive with your put selling. You're getting paid handsomely to provide insurance to the market.

The key insight: Sell fear, not complacency.

Protecting Your Capital

This strategy is not without risk. Here's how I manage it:

1. Position Sizing Never let a single position represent more than 5-10% of your account's buying power. One bad trade shouldn't blow up your account.

2. Defined Risk Alternative If naked puts make you uncomfortable, sell put spreads instead. Buy a further out-of-the-money put to cap your maximum loss. You'll collect less premium but sleep better at night.

3. Rolling If a trade goes against you, you can often roll down and out — close the current position and open a new one at a lower strike and further expiration, collecting additional premium.

4. Avoid Earnings/Events For commodity futures, be aware of OPEC meetings, inventory reports, and other scheduled events that can cause massive moves.

5. Mind the Leverage Remember: futures are leveraged. A 5% move in /ES is $15,000 per contract. Respect the instrument.

SEE MY TRADES IN REAL-TIME

If you want to see the exact trades I'm making in real-time, including my entries, exits, and position sizing — make sure to subscribe and hit the notification bell.

And if you found this valuable, smash that like button. It helps the algorithm show this to more investors who are stuck in the stock-only mindset.

Drop a comment below: Are you already selling futures options? Or is this completely new to you?

Next week, I'm going to show you my exact process for selecting strikes and managing positions when they go against you.

Until then — keep compounding.

FUTURES OPTIONS

Warning: these are very risky, use only money you can afford to loose. Always keep the sizes small to have a margin of safety. Sell 12 Delta instead of 20 Delta to mitigate risk. My favorite is selling a put on the /ES (SP500 E-Mini Futures). I do a few of those per week. Using $14,000 to make $3K. 

Looking at my last 260 trades, the one with highest Return on Capital per Day (ROCD) was selling the /ES put:

EXAMPLES FOR EACH STRATEGY

ES Put Credit Spread 

NQ Put Credit Spread 

♻️ Share this guide with friends in need of an additional income stream ♻️

NQ Iron Condor

Portfolio Allocation Examples

Conservative Portfolio ($50,000 Account)

Risk Level: Low-Moderate
Total Premium if All Win: $15,250 (30.5% account return in 45 days)

Moderate Portfolio ($50,000 Account)

Risk Level: Moderate
Total Premium if All Win: $16,400 (32.8% account return in 45 days)

Aggressive Portfolio ($50,000 Account)

Risk Level: High
Total Premium if All Win: $12,600 (25.2% account return in 45 days)
WARNING: Naked positions carry substantial risk. One adverse move could wipe out account.

Key Risk Considerations

• Never risk more than 2-3% of account on single position

• Maintain 30-50% cash reserves for adjustments

• Close at 50% of max profit (don't be greedy)

• Cut losses at 21 days latest

Trade Entry Checklist

Before Entering Each Trade:

✅ Check implied volatility rank (IVR > 30% ideal for selling)
✅ Verify margin requirements with broker
✅ Set profit target (50% max profit)
✅ Calculate position size (< 3% account risk)
✅ Ensure sufficient buying power for adjustments