The Relative Strength Index (RSI) is a momentum oscillator that ranges from 0 to 100. Readings below 30 suggest a stock is oversold; above 70, overbought. For put sellers, it's a filter that keeps us off names where momentum is working against us.
Why RSI Matters for Put Sellers
Selling a put on a stock in freefall means the stock has to fall further before it reaches your strike — but it also means the momentum is against you. We'd rather sell puts on names that aren't already stretched to the downside, where a bounce or consolidation is more likely than a continued plunge.
How We Use It
- Avoid selling puts on names with RSI pinned below 30 and falling.
- Prefer moderate RSI where momentum is neutral or turning up.
- Combine RSI with support and IV Rank — never trade it alone.
A Filter, Not a Signal
RSI doesn't trigger a trade by itself. A stock can stay oversold for a long time. But paired with support and trend, it keeps us out of the trades most likely to run against us — and that's often worth more than finding the perfect entry.