Naked Put Write is sometimes known as a Put Write, Naked Put, Write Put Options, Short Put,
Uncovered Put Write, Selling Naked Puts or Short Put Options. A Naked Put Write is when you Sell To Open Put options without first being short in the underlying stock.
Which also means that you are selling a put option when you do not own that put option in the first place. When the stock rises, the put options that
you sold expire out of the money, giving the whole price of the put options as profit.
One would use a Naked Put Write to speculate a quick rise in the price of the underlying stock and still to make a profit even
if the underlying stock stays stagnant.
One should be familar with
put options and
options trading before executing the Naked Put Write strategy.
When you Sell To Open a put option in this Naked Put Write options strategy,
you are essentially playing the role of a banker where you sell the put options
you are selling put options to people who are betting on the price of the underlying stock going down. If they are wrong and the stock rises, you keep the money they paid you for the
put options if the put options expires Out Of The Money ( OTM ). If this person is correct and the stock falls, you, as the banker, suffers a loss. That
is how a Naked Put Write works in a nutshell.