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3.18.2017 - Financial Intelligence Report Bookmark

The Commercial/Selling a Put
 
I got an email the other day from a gent who was watching TV, and a commercial came on. In that “financial” based commercial, there was a conversation between a client and what appears to be either his broker, or advisor. In the flow of conversation, the advisor says to the client, “well we might consider selling a put...”  to which the client says something like “that’s an interesting idea.”

12.17.2014 Financial Intelligence Report Bookmark

Naked positions

 

I'm going to wrap up our two week tutorial session about options. We've discussed what they are, how they work, ways to use them, etc. Today we're going to end with one of the riskier aspects of options trading, called "selling naked". While it is indeed more risky, meaning you have to really manage that risk, along with the risk comes big rewards. So, let's get to it...

 

As you know if you think a stock is going to rise you can buy a call option and if you are right your call option will appreciate in value. On the other hand, if you think a stock is going to fall you can buy a put on it and sure enough if you are correct and the stock falls your put increases in value and you have made a profit. That being said ... there are other ways to play this option game and in this section we are going to look at one of them. As a technical term it is called "selling a naked put" and although the name sounds a bit kinky...believe me that is the true name. The first thing to keep in mind as we go forward is that this technique is very profitable if done correctly and any time the market is going to reward you with higher profit's...instantly you should think higher risk.


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