Hey Traders,
On Monday, I showed you how I get paid to be wrong using credit spreads — a way to structure trades that gives me 3 out of 4 ways to win.
Today, I want to show you another trade that flips the usual script…
Because instead of buying something and hoping it works out, I’m getting paid up front to be willing to buy something I already like.
And to make things even better, I’m getting paid to buy the stock at a discount!
It’s called a naked put — and even though the name sounds scary, it’s actually one of the most common-sense trades I do.
Let’s get into it.
Don’t Let the Word “Naked” Scare You
People hear the term “naked put” and assume it’s risky.
But it’s not risky if you actually want to own the stock.
Selling a naked put just means you’re offering to buy 100 shares of a stock at a specific price… and someone is paying you a premium to do it.
If the stock never drops to that price? Great — you keep the premium and never buy the shares.
If the stock does drop to that price? You still keep the premium… and now you own a stock you already wanted, but at a discount.
How It Works (And Why I Love It)
Here’s what usually happens when I sell a naked put:
- If the stock goes up → I keep the premium and never have to buy the stock
- If the stock stays flat → same thing; keep the cash, and I have no obligation
- If the stock dips a little → again, I keep the premium with no obligation to buy the stock
- If the stock drops hard below my strike → I buy the stock at a discount
If you remember Monday’s discussion, that’s a lot like the spreads I talked to you about.
It that means 3 out of 4 scenarios still end in a clear win for me — and the “worst case” is that I end up owning a good stock I already liked at a better price than I could’ve gotten otherwise.
Tell me: how’s that risky?
“But What If You Get Assigned?”
This is the #1 question I get about naked puts.
And my answer is simple:
Assignment isn’t a bad thing if I actually want the stock.
Think about it — the market just gave me shares I already wanted… at a discount… PLUS, it paid me a premium while I waited.
Let’s look at an example. Let’s say XYZ stock is trading at $100. I sell a $95 strike price put for $1.
Instantly, $100 dollars is deposited into my account (1 put controls 100 shares, so that’s $1 x 100 shares = $100)
And if the stock happens to dip to $95 and I am assigned? I actually own the stock at $94.
I’m already ahead of the game!
That’s not a loss. That’s called getting paid to be patient.
Last Thoughts
The bottom line is this:
You don’t have to chase trades.
You don’t have to pray for a move.
You don’t have to guess.
With the right approach, you can get paid for being willing.
And when you build your trades around stocks you’d happily own anyway… that “worst case scenario” starts to look a lot more like a win.
I’ll be back Friday with a third way I get paid — using stock I already own to generate steady income.
Stay tuned!
Trade well,
Jack Carter
P.S. The key to making these strategies work is picking hot stocks… and I just went live to share the hottest stocks of July! Click here to see them now!
