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Visually Analyze Option Strategies
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Naked Put

Description	
	A naked put (also called an uncovered put) is a put option where the option writer
	does not have a short position in the underlying stock or other instrument. If 
	the market price of the underlying falls below the strike price of the option, 
	the holder can exercise the put option and force the writer to buy the underlying
	at the strike price for cash, profiting from the difference between the 
	market price and the option's strike price. But if the market price remains at 
	or above the strike price for the duration of the option, the option will expire
	worthless and the writer will profit from the premium charged to the buyer for 
	the privilege of receiving the option.
	
	Naked options are risky, but have the potential of being very rewarding. 
	If the stock price stays the same or slightly increases then the put option 
	seller profits and the option expires worthless. This type of strategy would 
	allow an investor the opportunity to buy stocks at a discount. However, if the
	stock moves down, then the option premium increases, and it becomes more costly
	to close the put position. The investor's total loss potential is limited 
	simply because the stock can not drop below zero.

Summary of Naked PUT Strategy
	1. Write PUTs only when you are bullish on the stock, index, or market in general.
	2. Select candidates whose underlying stock is in an up-trend or has a recent BUY signal.
	3. Select candidates whose fundamental outlook is positive and getting better.
	4. Generally, the time to maturity should be no more than 2 to 3 months.
	5. Diversify your Portfolio with 4 or more different stocks.
	6. Out of the money options are most often selected since "in the money" options 
	increase the probability of being exercised, even in a flat market.


	

	



 
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