Lee Lowell wrote a good book on options trading "a direct selection of four strategies from the trading floor." He is one of the leading options professionals in the United States. Lee spent six years in the options market on the New York Mercantile Exchange [NYMEX] New York Mercantile Exchange [NYSE: NYMEX]. He has his own office trading company that trades commodities, stocks and index options every day.
One of the strategies I like about this book is selling bare clothes. Naked put is an option that the option author has no position in the underlying stock. Use this strategy when you want to buy stocks, but you think the price is too high. By writing a put option, you will get a premium. If the stock price rises, you will retain the premium, but if the stock falls, you can buy the stock at the strike price.
You can see that the potential profit is limited to the option premium. If the stock has been falling to zero, the potential loss will be unlimited. So if you don't know what you are doing, this strategy is very dangerous.
The key to this strategy is simple. A smart put seller will only sell a put option contract at the strike price at which you want to buy the stock. The secret is to choose the stock you want to own at a cheaper price than it is now. This is my job, I am looking for stocks that have risen because of good returns. I want to buy at a lower price because of the price increase, so I just write a put option at a lower execution price and wait until it expires.
Orignal From: Selling nude
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