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Deutsche Bank (DB) (NYSE:DB) has been having a rough year, with the company losing nearly half of its value during that time. However, Tuesday’s election results were just what the financials needed, as the major big banks and small regional banks alike were boosted in anticipation of a new administration and possibly a new set of rules for Wall Street.
The stock is heading higher, and I want to use this opportunity to collect some premium by selling puts on the name.
Sell to open the DB Dec. 16th $12 put at about $0.30.
For those who aren’t familiar with this strategy, the basic premise for a naked put write is to sell (also called “writing”) put options and thereby get income upfront in the form of the option premium.
By selling a naked put, you’re betting against the buyer of that put option, who thinks that the underlying stock is going down. If the buyer is wrong and the stock goes up, the put will expire worthless — so, as long as DB remains above $12 through expiration, you (as the seller) would have no other obligation and would simply walk away with 100% of the option premium you collect today.
Ken Trester is editor of the popular Maximum Options program. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.