Make Money At Home Selling Naked Puts
Sell Naked Put Options And Make Money At Home
This article will provide an overview of the concept behind selling naked (to open) put option contracts. This is a system that option traders utilize when the underlying price of the stock is forecasted to increase above the option exercise price (prior to the expiration date); you will make money with this strategy as long as the underlying stock price does not fall below your exercise price and force you into a margin call situation (discussed below).
In order to begin, you’ll need to deposit $2,000 into a brokerage account and agree to the terms of a margin account. A margin account ensures that a trader’s account balance meets the minimum requirement of the government and the brokerage firm. Typically, the minimum margin requirement is 20% (in cash or stock value) of the exercise price and 100% of the premium received. If the price of the underlying stock decreases below the exercise price, you will receive an alert notification (margin call) from your broker requiring that you add more funds, sell other stock, or close your position by buying-back your options (buy to close) at a loss. If you do not meet the margin call within 2-3 days, the brokerage firm reserves the right to liquidate other stocks (without your permission) in order to meet the minimum margin requirement.
Now that you’re all set up, here’s an example of how you would sell a naked put:
Let’s say that it’s March and you sell ten (10) contracts (1,000 shares of underlying stock) of a put option expiring in April (third Friday) for XYZ Company at an “out-of-the-money” exercise price of $50 and an option price of $1 / share; the stock is trading at $52 / share. The trade will make $1000 immediately ($1 X 10 contracts X 100 shares / contract).
Now let’s see how much of this money you can keep:
Scenario # 1: If the price of the underlying stock increases above your exercise price prior to the expiration date, you keep all your money and the buyer’s put option expires worthless. Congratulations, you have done your homework and were successful at making money at home! However, it’s not always that easy to make money online.
Scenario # 2: If the price of the underlying stock decreases below your exercise price, you will need to either buy-back your options at a loss or deposit more money into your margin account and hope the stock increases back above your exercise price by the expiration date. If the stock does not increase above your exercise price by the expiration date you will be subject to buying the stock at the exercise price, which is higher than the market price. Remember, the put option buyer has the power to obligate you to buy the stock at the exercise price if the value of the stock is less than your exercise price.
The biggest risk in selling naked puts is where the underlying stock suddenly collapses and you have to pay a lot of money to buy-back your options in order to avoid having to buy the underlying stock at the significantly higher exercise price (compared to the market price). In order to hedge against this potential scenario, many option traders opt to sell covered puts in order to make money online. This is where the underlying stock is sold short prior to the put sale; if the stock collapses, the stock will be bought at an exercise price that is lower than the short sale price and the investor actually makes money off the spread.
Although selling put options is an attractive strategy that does not require an initial capital investment, there are some calculated risks that are assumed with this strategy. In order to reduce your risks, you will need to have capital money at your disposal to hedge your trades. This requires that you make more money and potentially even capitalize on the bargain stock prices available during this recession. I can show you a quick online home business strategy that actually worked for me. I know, I know, I by no means am a home business type of guy, as stock and option transactions are my passion! What I found though was a simple and systematic online home business strategy that actually began to make me real money at home. It’s called the “Independent Profit Center” (IPC) and it happens to be one of the best online strategies, along with a few of my favorite “spread options”, that I’ve seen to make money online.
What makes this opportunity so unique is the training and support that the company provides; you aren’t required to read a bunch of confusing books or CDs in order to get started. All training is conducted via a step by step video webinar (located on their website). You will literally have your website up within an hour and be making money online within 24 hours.
IPC doesn’t hide anything from you and you know exactly what this business is about before you apply. If you go to my website, you can join a FREE webinar LIVE online and see exactly how IPC will make you money at home. I guarantee that after seeing this webinar you will be pleasantly surprised with the systematic methods that are used to make money online. I was and have been making money at home ever since.
IPC is a legitimate home business that truly works for the average person. The training, support, and proven system are all packaged in a way that will make you money at home.
For more information, please feel free to visit my IPC website at http://www.ExtraIncomeExtreme.com or if you have money to invest and want to double your money in one (1) year visit http://www.squidoo.com/options103
You could also visit my “Stock Market Crash Course” Blog at http://www.StockMarketCrashCourse.blogspot.com/ for ten (10) simple ways to trade options and make money at home.
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Sell Naked Put Options And Make Money At Home This article will provide an overview of the concept behind selling naked (to open) put option contracts. This is a system that option traders utilize when the underlying price of the stock is forecasted to increase above the option exercise price (prior to the expiration date); you will make money with this strategy as long as the underlying stock pri…
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