How the Bot Actually Makes Money — and the One Way It Loses
Most people buy a stock and hope it goes up.
BeepBoop does something weirder: he gets paid to promise to buy a great company — at a price lower than it trades today.
That's the whole trick. Let me show you an actual trade.
The move, in one real example
Tractor Supply trades at ~$30. It's a boring, wonderful business that's raised its dividend for years.
BeepBoop sells a "$28 put." In plain English, that's a promise: "If Tractor Supply falls to $28 in the next month, I'll buy 100 shares at $28."
For making that promise, someone pays him ~$20 today. That money is his, no matter what happens next.
Then one of two things happens, and he's happy with both:
Tractor Supply stays above $28. The promise expires worthless. He keeps the $20 and never buys a thing. On the $2,800 he set aside, that's ~0.7% — in a month, for a strike 6% out of the money. Rinse, repeat.
Tractor Supply dips below $28. He buys 100 shares at $28 — a company he wanted to own, now ~6% cheaper than today. His real cost is even lower ($27.80) because he already pocketed the $20. Then he collects the growing dividend and sells more options against the shares.
Heads, he gets paid to wait. Tails, he buys a wonderful business on sale. That's the game.
"Okay, so what's the catch?"
Good instinct. Here's the honest version — and it's the most important thing on this whole site.
When the bot gets forced to buy ("assignment"), it's because the stock fell. Most of the time that's fine — quality companies dip and bounce. But not always.
The one real way we lose: we get put a stock, it keeps falling, and it never comes back — usually because the business actually broke and cut its dividend. Then that $20 premium is a rounding error against a real loss on the shares.
So how often does that happen? We didn't guess. We measured every quality dividend grower from 2007 to now — through 2008 and 2020.
The receipts on getting "put" the stock
Selling a put ~5% below the price, one month out — our bread and butter. Nineteen years of history says:
- You get assigned ~16% of the time — about twice a year if you roll monthly. The other ~84% of the time you just pocket the premium and move on.
- When you do get assigned, you're usually barely underwater — a median of 3.2% below your strike.
- And it comes back: 62% of the time the stock is back above your strike within a year, 71% within two — and that's before counting the premium you banked and the dividends you collected while waiting.
Flip it around: the genuinely bad outcome — assigned and still underwater two years later — is about 1 in 20 trades. The steamroller is real (the worst assignment in the data was a −57% crash gap), but it's rare. It's exactly why the only companies the bot sells puts on are ones we'd be glad to own through an ugly year.
The defense, three layers
- Only wonderful companies. Decades of dividend growth. If we get put the stock, we wanted it.
- A lower price means a higher yield. Buy the same company 6% cheaper and your dividend income on it goes up. We watch the dividend on everything we own — the day a company cuts, the thesis is broken and we're gone.
- We keep a cushion. Selling well below the current price means the stock has to fall a real amount before we're on the hook at all.
The honest number
You'll see "33% a year!" thrown around (it's right there on our own pick cards). That's the rate on the winning months — it is not what you actually make, because the assignment months pull it down.
Blended through good years and ugly ones, this is a ~10%-a-year strategy — less in a taxable account, more in an IRA. What the options really buy you isn't a bigger number. It's income you can see, and a much smoother ride.
We're not trying to get rich by Friday. We're compounding quietly, for a very long time, without blowing up.
That's the method. Nothing hidden.