Acquiring Stock with Naked Puts

Let’s see how naked puts can be used as a strategy to acquire a good stock at a desirable price. An example will be used to illustrate this strategy:

  • Example 3. Suppose that you have carefully researched XYZ stock. You believe that buying 200 shares of this stock would be a sound investment for the future. XYZ is currently selling for $31 per share, and although you are prepared to buy the stock at that price, it would be nice to get it for a little less.

    You note that the front month $30 puts are being sold at $1.25 per share. If you sell two of these puts naked, this brings $250 into your brokerage account. By being naked in those 2 puts, you must be prepared to buy 200 shares of the stock at $30 if necessary. ...

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