The strategy of selling naked puts for extra income works better in bull markets than in bear markets, but it still has a place in the latter.
With naked puts, you are selling the right for another investor to sell a certain stock to you at a given strike price on or before a given expiration date for the contract. It’s a cornerstone of my options strategy for my forthcoming stock advisory newsletter, The Liberty Portfolio.
If the stock price doesn’t close below that strike price on or before expiration, then you get to keep the premium that you earned for selling the contract. Actually, you’d keep it even if the stock fell below that strike price, but you’d also have to buy that stock. The key to this whole naked put strategy, of course, is that you want, or don’t mind having, that stock put to you.
Here are three naked puts trades to generate $1,000 in cash for you over the next month or so.