Selling Naked Puts: Income Potential, Margin, and Risk
Selling a naked put means selling a put option without owning the shares or holding a fully offsetting position. You collect a premium now in exchange for an obligation: if the stock finishes below the strike, you must buy 100 shares at the strike price. It can be a reasonable way to get paid while waiting to buy a stock you like, and it can be a reliable way to take a large loss if you treat the premium as free money. This guide covers how it works, what the real worst case is, and how to size it. ...