Hey traders,
Yesterday, I talked about why the current market is perfect for selling naked puts.
Now, for those of you who are ready to take the next step and actually place your first naked put trade, today’s post is for you.
A naked put is when you sell a put option on a stock you’re willing to buy at a certain price. But here’s the beauty: You don’t have to own the stock to do this, and you can get paid upfront.
It’s a straightforward process:
- Pick a Trending Stock – Look for a stock that’s trending higher. I shared this article a while back showing how I do that. A trending stock raises the odds that the stock won’t reverse course and drop to the strike price of the put you sold. You should, however, be okay with owning this stock if it drops below the strike price.
- Sell a Put Option – Choose a strike price below the current market price. I generally advise 7-10% below market price. The lower the strike, the more cushion you give yourself in case the stock drops. The flip side of that is that you will collect less premium for selling puts that are further out-of-the-money.
- Collect the Premium – Once the option is sold, you collect the premium instantly. That money is yours, no matter what happens.
- Wait for Expiration – If the stock stays above the strike price, you keep the premium and don’t have to buy the stock. If it drops below the strike price, you’ll be assigned the stock, but you’ve effectively bought it at a discount.
That’s it! Naked puts give you a fantastic way to earn consistent income and potentially pick up stocks you want at a lower price.So, next time the market gets rough, don’t panic. Stick to your plan, roll with the punches, and just like riding off road, you’ll find a way to navigate through the volatility and come out stronger on the other side.
Trade well,
Jack Carter
P.S. One stock is getting FLOODED with Wall Street cash. And I’m spilling the beans on it here!
