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| Selling Put Basics |
Q: What is selling puts?
A: Also known as "naked put", a bullish-to-neutral option stragegy requring the selling of a put option, the risk/reward profile for selling puts is identical to the covered call strategy.
Q: How does PowerOptionsApplied use selling puts?
A: New recommended put positions to be sold are published the Monday and Tuesday following options expiration (3rd Friday of the month). Generally, the positions expire worthless in less than one month. Profits are realized from the premium retained from selling the put option.
Q: What are the risks associated with selling puts?
A: In the event the underlying stock for the put option decreases in price, the position may experience a loss. Generally, in this case, the stock for the sold put options is allocated to investor's accounts. Typically, when a stock is allocated to accounts, a covered call position is then entered for the stock, and many times the position can regain profitability from the subsequent rolling of the position.
Q: How much money can I make?
A: Our research-supported trades aim to help you realize a profit. Total profits are proportional to the size of the investment. Please see our Track Record for past performance details. Remember: Past performance is not an indicator of future performance.
Q: How much money do I need for selling puts?
A: Capital requirements vary from broker to broker, so check with your broker. At most, the maximum capital requirement is the strike price of the put option multiplied times 100 (# shares in an option contract). The average strike price of most sold put positions is $35, so most positions will require around $3,500 to be available in your brokerage account for trading.
Q: How do I win or lose with selling put positions?
A: As long as the stock price at options expiration is the greater than or equal to the original price when purchased, the position will be profitable. In many cases, the stock can even decrease in price and still experience a profit. If the stock price decreases significantly, then the position may experience a loss.
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Selling Puts - Naked Puts - Naked Put Trading
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