[pjob]

The idea is that you have a specific entry price in mind and are waiting until it drops to that point. While you wait, you can collect a premium from selling the option. Let's say that based on your assumptions you think stock X would need to drop to $6 for you to make a good enough risk-adjusted return, but it's currently trading at $7. While you're waiting for the price to drop you could sell a Put (generally a cash-secured put) to collect a premium. If the stock price drops below $6 within the duration of your option, you'll get assigned the stock at the price you wanted ($6), but if it stays above this price the option expires worthless and you keep the premium.

There's too much detail to cover in a short comment, but the main risks with a strategy like this is that the price drops well below your strike price and you're forced to buy the stock at higher price than the current market value. For cash-secured puts, you'll also need enough cash in your account to cover the purchase of the stock at your strike price. That said, depending on your mindset and goals, this can be a way to generate income while waiting for the right price.

The opposite side of this also applies for exiting positions. You can sell calls on a stock you own (covered calls) to collect a premium while you wait for the price to reach your chosen strike price. The risk being the potential that the price blows past your strike price, your shares get called away, and you don't get to profit from the extra gains above the strike.