3 Naked Put Options for a ‘Grand’ July

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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.

3 Naked Put Options for a 'Grand' July

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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.

Naked Put Options: Starbucks (SBUX)

Naked Put Options: Starbucks (SBUX)

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Starbucks Corporation (NASDAQ:SBUX) is kind of a frequent choice for when I sell naked puts. As a world class company, I’m happy to buy Starbucks stock even at these prices and hold for the long term.

The business is on solid, if not spectacular, footing. However, I feel confident that founder Howard Schultz is going to provide SBUX with a new vision for the next several years.

SBUX stock closed Wednesday at $60.27. This is only 6% below its recent high. SBUX also has weekly expirations, which provide us with a large choice of strike prices. I would just push out to next expiration, so sell the 21 July $60 naked puts, which are selling for $1.10. That provides you with a 1.75% return for a 35-day holding period, or 18% annualized.

Sell three contracts for a total of $330.

Naked Put Options: Wynn (WYNN)

Naked Put Options: Wynn (WYNN)

Wynn Resorts, Limited (NASDAQ:WYNN) recently broke out of a long-term trading range and has hit recent yearly highs. It is very volatile, so that gives us great premiums to sell naked puts for.

You can try and get greedy by selling naked puts very close to the money, but I prefer selling at several dollars below the closing price of $133.49. That way, you have some buffer in case WYNN stock drops close to expiration.

That’s why I would look at the 21 July $130 naked puts, more than three bucks out of the money. You can sell these for $3.40, which is a 2.5% return in 35 days, or 27% annualized. Sell one contract for $340 and bring your total sale of naked puts to $670.

Naked Put Options: Disney (DIS)

Naked Put Options: Disney (DIS)

Walt Disney Co (NYSE:DIS) should never be counted out. I hate how ESPN is handling its business. Robert Iger needs to step in and shake things up, including cutting all political commentary out of programming. It is hurting viewership because nobody wants politics mixed with their sports.

Fortunately, it’s summer movie season, which means lots of Marvel films, a new Pixar film and a new “Star Wars” film later this year. Theme parks continue to do very well, with consumers apparently happy to absorb constant price increases. Attendance remains strong. Disney’s regular TV programming, including the ABC network, continues to produce solid results. It’s a cash flow machine, and that’s just one reason to love DIS stock.

DIS stock closed at $106.14 on Wednesday. I would sell the 21 July $105 naked puts for $1.65. I think if you sell two of these, you should be fine, and hit our $1,000 in monthly income target.

Lawrence Meyers is the CEO of PDL Capital, and manager of the forthcoming Liberty Portfolio stock newsletter. He has 22 years’ experience in the stock market, and has written more than 1,600 articles on investing. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com. As of this writing, he was long DIS stock.


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