...selling naked puts is a very profitable thing to do if you are right in your assumptions of where the stock is heading. If the trade goes sour though...you will lose money quickly.
Today I’m going to talk about “weekly” options. Are they good, bad or indifferent? Let’s chat.
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."
So I got this email, and Joe R. asks, "Bob, what's up with selling a put and why is that an interesting idea?" I thought maybe others might be interested in the answer, so I told him I'd address it to the subscription base.
If you don't know how options work, then this is going to sound like goblety -gook. But even if you do know about buying calls and puts, "selling" a put is in a different category. You'll need to pay attention because the differences are many.
The following is from an options tutorial I wrote years ago, and sometimes parts of it come in pretty handy. This is one of those times, because later in the tutorial you're going to see why in that commercial the client thought that selling a put was an "interesting" idea.