How I use options to supplement my retirement

What is a naked put…

A put option gives the holder the right to sell or “put” 100 shares of the underlying stock per contract to the seller of the contract. The option chain determines the price (strike price), and date by which (expiration date) that this must happen. If the option is not exercised by the expiration date, the option expires worthless. A regular put is when you sell a put option and have the funds in your account to purchase the stock if “put” to you. A naked put means that your are using a margin account and need to balance more risk. I trade naked because my strike prices are well below the current market price. I take in less premium for these trades, but I’m far less likely to be assigned. I’m just picking up the crumbs from the fat cats that pass by. It works for me.

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