When should I sell my naked put?

A naked put is used when the investor expects the stock to be trading above the strike price at expiration. As in the naked call position, the potential for profit is limited to the amount of premium received.

How do you close a naked put?

A naked option position begins by selling the option on a stock you do not own. To close it, you buy it back, maybe roll to a future month, higher/lower strike price. So simply buy it back. It may well expire, in which case the firm will issue a confirm that the option expired worthless.

Do you need collateral to sell naked puts?

Selling naked put options is similar to buying a call option, because you make money when the underlying stock goes up in price. You need to put up collateral to write naked puts, usually in an amount that is equal to 20 percent of the current stock price plus the put premium minus any out-of-the-money amount.

Why would you ever sell a put?

Selling (also called writing) a put option allows an investor to potentially own the underlying security at both a future date and a more favorable price. Note that the writer of a put option will lose money on the trade if the price of the underlying drops prior to expiration and if the option finished in the money.

Is a naked put bullish or bearish?

DEFINITION. A Short Naked Put is a bullish strategy that is executed by simply selling a put option. It is a common strategy that can be used to buy shares of stock at a lower price, while keeping the premium collected if the stock price does not decrease.

How far do you have to sell naked puts?

Write PUTs only when you are bullish on the stock, index, or market in general.

What happens if a naked put is assigned?

If a put is assigned, then stock is purchased at the strike price of the put. In the case of an uncovered put where there is no offsetting short stock position, a long stock position is created.