Naked Options

 

Short Naked Put

A Short Naked Put is a bullish strategy that is executed by simply selling a put option. It is a common strategy that can be used to buy shares of stock at a lower price, while keeping the premium collected if the stock price does not decrease.

Directional Assumption: Bullish

Setup: Sell OTM Put

Ideal Implied Volatility Environment: High

Max Profit: Credit received from opening trade

How to Calculate Breakeven(s): Strike price - credit received

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Short Naked Call

A Short Naked Call is a bearish strategy that is executed by selling a call option without being “covered” by long stock or a long call option. Selling naked calls is an undefined risk strategy.

Directional Assumption: Bearish

Setup: Sell OTM Call

Ideal Implied Volatility Environment: High

Max Profit: Credit received from opening trade

How to Calculate Breakeven(s): Strike price + credit receive
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