   2: The Naked Put Strategy Strategy: Naked put Opening the Trade: "Sell to open" a put option Closing the Trade: 1. "Buy to close" a put option with the same strike and expiration 2. Let it expire worthless 3. The put is exercised by the buyer, and you must buy the stock Summary: This is equivalent to a covered call (based on the risks and rewards), except you don't own the underlying stock. You think the stock price will rise moderately, so you sell a put option against it. You are hoping the option price will decline, so you can buy it back. Or the option will expire worthless. Employ this strategy only if you are bullish on the underlying stock, and you wouldn't mind owning it at the strike price minus premium received. Also, there is a margin requirement on this trade of 20% of the underlying cost of the stock minus premium received. If you sell an XYZ 50 PUT at $5, you will have to have ($50 - $5) x 100 = $4,500 of cash or margin available. Maximum Profit: The premium received. Maximum Loss: Large, but limited to 100% of the cost of owning the underlying stock. Breakeven: You lose money on this trade if the stock price is below the strike price minus the premium received on expiration day.  Figure 1: Sell 1 NOV 60 PUT on XYZ Example:
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