Naked & Uncovered Options
One of the great benefits of selling naked put options is that you collect the premium from selling the options to the buyer. You get this money up front and it’s deposited into your trading account. Once the trade is executed, all you have to do is wait to see if the stock falls below the strike price by option expiration. If it does, you will be assigned on your trade, meaning you will have to purchase 100 shares of stock at the stated strike price.
If the stock does not fall below your strike price by option expiration, the trade is dead, but you get to keep the premium you were paid up front. So, at least you’re compensated for your time to see if you ever get assigned the shares.
Be warned, this is not a strategy for everybody, and not everyone can be approved to sell naked options. The reason for the warning is because someone might get caught up in the frenzy of selling options just to take in the premium. Don’t do this! Only sell naked puts on stocks that you definitely have a desire to keep in your portfolio. And don’t sell more put option contracts than you’re comfortable owning.
Selling Naked Options Articles on Smart Profits Report:
The Uptick Rule: The Biggest Regulatory Change In A Decade & What It Means For You
Naked Options: Words of Caution for a Lucrative Options Strategy
Selling Naked Puts: Get Paid Now To Bargain Buy Your Favorite Stocks Later
Limit Orders vs. Naked Put Selling: Getting Paid to Place Them On Your Favorite Stock
Short Selling: Beating the Government By Going Short
Uncovered Options: A Win-Win Trade that "Puts" You In the "Bookie’s" Seat
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