Encore Capital Group (ECPG): Naked Puts
The next choice for naked puts is a terrific company that is vastly undervalued. Encore Capital Group (ECPG) is a global buyer and collector of bad consumer debt. ECPG has a very sophisticated operation and just reported blowout earnings, with earnings continuing to increase at an astounding rate. I think ECPG stock should be trading in the mid-$60s, yet here it is at $48.69.
This is where I would love to have a stock put to me — at a valuation well below where I think it should be trading.
In this case, I would sell two of the April 50 Puts for $2.10, for a premium collection of $420.
I wouldn’t mind buying the stock either, then selling covered calls against half the position, but only if ECPG stock goes above $50. Right now, the 50 strike is too far away to make any good money on the premium from covered calls.
All told, you now have $760 in income ($340 + $420).