Selling Naked Puts is a great option trading strategywith ROM Return on Margin similar to that of selling credit spreads, and certainly no more risky in practice although in theory, it looks quite scary. When you sell a put on a stock, you are setting yourself up to buy a stock at a price that suits you. Why not pick a stock in an uptrend see Trend Analysisand then month after month, sell naked puts. You can make a great income from this!

The ONLY drawback to this strategy is that most brokers require quite a high margin. In the event that the stock does crash to your chosen strike price, your broker will want to be sure that you have enough money to buy the stock at that price.

Why this steep margin requirement? Well, in theory, if you buy the stock at the strike price, it is usually because the stock is crashing Sure, this could happen However, just to be safe, the brokers keep a good safety net in place!

Firstlypick your stock based on trend analysis. You need a stock that is trending upwards or sideways. Make sure that the general market trend is a match, and that there are no earnings or dividend dates in the next month. Secondlypick a put trade. Pick an expiration date that is no longer than 30 days out - you want your option to expire so that you can sell another one!

Make sure that you have enough margin if you don't know how to work this out, run a similar paper trade on your options software, and see how much cash you will need to have available in case the trade turns against you.

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Thirdwatch your trade. Wait for the Put to expire or be exercised.

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If you have picked a good trend, your options should expire forex earlywarning blogspot by the next expiration date, at which time you can sell another one in the next month! If you get exercised, it means that your chosen stock is quite cheap, and you have probably bought it at a discount. Either sell to cover your margin, or an even better strategy is to sell covered united states forex reserves on the stock that you now options pick swing trading strategies - and this way, you can options pick swing trading strategies further discount the cost of the stock.

If you do not want to buy the stock, and are only using this strategy for income, you should probably be trading credit spreads instead, or you will need an exit strategy.

Buy the how much money does a computer technician make per hour back trading fractals system it goes ITM this is why you need your margin availableand sell another naked put at a lower strike price.

You will need to use a stop loss to exercise this trade, which you put in place as soon as you sell your first put. This way, you should come out even or only slightly under.

Selling naked puts is a great trading strategy if you have enough money to cover the margin requirements. It is safe, risk averse and very profitable. If you are nervous at the idea, or don't have enough money to cover the margin, then selling Credit Spreads is as profitable and probably even safer as an option selling strategy.

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