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. Selling naked calls is an undefined risk strategy. As a result, the ideal environment for selling naked options in terms of the premium collected is when IV is high. When do we close Naked Options?
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"Can I Close Naked Put Before Expiration?" by casamarinada.com Answers
When selling puts with no intention of buying the stock, you want the puts you sell to expire worthless. This strategy has a low profit potential if the stock remains above strike A at expiration, but substantial potential risk if the stock goes down. The reason some traders run this strategy is that there is a high probability for success when selling very out-of-the-money puts. If the market moves against you, then you must have a stop-loss plan in place. Keep a watchful eye on this strategy as it unfolds. You may wish to consider ensuring that strike A is around one standard deviation out-of-the-money at initiation. That will increase your probability of success.
Thus, naked calls are one means of being short a call. Many investors aren't sure if being "short a call" and "long a put" are the same thing. When you are long a put, you have to pay the premium and the worst case scenario will result in premium loss and nothing else. Consider the payoff diagram:.