NameSell Put Option
TypeOption
RiskLow
RewardMedium-High
CycleVarious(weekly, monthly)
Profit/LossUnlimited Loss, Profit capped by premium
MarginContracts x shares less total premium
Entry RulesBuy 1 OTM Call Far-term, Sell 1 OTM Call
Reference:
Naked Put Strategy
Sell Naked Put Risks
Sell Put Guide
Sell Put Tips



About Strategy

The strategy of selling a put option is considered to generate income when the market is neutral or expected to trend higher. An investor should use this strategy for a security when optimism is positive. If the security price drops and holder of the put is required to purchase shares at expiration or whenever the buyer of the put exersizes the option. Downside portection is non-existent in this strategy as certain adjustment or action is needed to protect any long extended drop in the security price. The selling of put options is a great way to generate income or get a security at a bargain price.