As we approach options expiration for June, that means it’s time to look for naked put options expiring in July or beyond. Naked puts can be a great way to create additional income for your portfolio, provided you choose stocks that you are happy to buy at that price. Naked put options are one of the strategies in my new stock advisory newsletter, The Liberty Portfolio.
By using naked put options, you sell the right (but not the obligation) for some other investor to “put,” or sell, a stock to you at a certain price (strike price) on or before a certain date (expiration date).
Should the stock fall below that strike price, and the other investor sells you the stock, he has essentially done the same thing as shorting the stock at that strike price, and will thus cover his position at expiration.
Regardless of whether the stock is put to you, you still keep the money you made for selling that contract.