A cash secured Naked Put strategy involves selling a naked Put Option, but the investor has the funds to pay for and take delivery of the asset or commodity at the Strike Price of the Put Option.
Cash secured naked puts are equivalent trades to a Covered Call. They are sometimes referred to as synthetic covered calls because the risk profile is the same, although cash secured naked puts do not require the investor to purchase the asset or commodity in advance (unlike covered calls).
Cash secured naked puts can be used as a method of reducing the cost basis of opening a position in an Underlying asset or commodity. The put seller takes in Premium from the put buyer, if the price of the stock falls then they must purchase it at the Strike Price, but with the Premium deducted from that amount also. If the stock does not fall, the cash secured Naked Put seller does not purchase the stock and keeps the Premium.
Contributed by: Ralph Windsor
Cash secured naked puts are equivalent trades to a Covered Call. They are sometimes referred to as synthetic covered calls because the risk profile is the same, although cash secured naked puts do not require the investor to purchase the asset or commodity in advance (unlike covered calls).
Cash secured naked puts can be used as a method of reducing the cost basis of opening a position in an Underlying asset or commodity. The put seller takes in Premium from the put buyer, if the price of the stock falls then they must purchase it at the Strike Price, but with the Premium deducted from that amount also. If the stock does not fall, the cash secured Naked Put seller does not purchase the stock and keeps the Premium.
Cash Secured Naked Put
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External Links
Cash-Secured Puthttp://www.optionseducation.org/strategies_advanced_concepts/strategies/cash_secured_put.html?prt=mx
OIC article describing the cash secured naked put.
View OIC Options Glossary in Options Market Glossary Directory
Uncovered Put Writehttp://www.theoptionsguide.com/uncovered-put-writing.aspx
Options Guide article about selling uncovered (naked) puts.
View Options Guide Strategy Finder in Options Market Glossary Directory
Selling Cash-Secured Puts For Incomehttps://www.tradeking.com/education/options/selling-cash-secured-puts-for-income
Trade King article on how to use cash secured naked puts as a method to generate income from options.
View Trade King in Options Market Glossary Directory
Naked Put vs. Covered Callhttps://www.borntosell.com/covered-call-blog/naked-put
An article about the differences between cash-secured naked puts and covered calls.
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