#5 – Diversify
Naked option writing, with its extreme risks, requires diversity. You should maintain at least four different option positions with different underlying stocks.
Remember, one of your overall goals is to stay in the game, and the best way to do that is to avoid betting all your money on one horse. Although the odds are heavily in your favor, losers can put you out of the game if everything you have is bet on that one position.
Finally, maintain very small positions in each stock so that a takeover does not nail you with a devastating loss.