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Riding Naked...Puts, That Is

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Looking for new investment options. Check out these strategies recommended by optionMonster Jon Najarian.

RIDING COVERED CALLS

In this strategy, think of buying a stock and selling a call against it like buying an apartment in NYC and then renting it out. The option allows you to collect rent, however, in exchange for collecting rent you are obliged to sell your apartment for a pre-set price.

RIDING NAKED PUTS

In this strategy you pick a price at which you’d be willing to own a stock anyway and then collect money for obliging yourself to buy it.

Three companies that could currently be well positioned for this kind of strategy are Anheuser-Busch, Huntsman and Genentech.

For example, look at Genentech. The stock is trading around $85. If you ride the January $55 puts you’re obligated to buy the stock at $55. The stock is probably a value at $55 if you have to buy it, but if you don’t, then you just collect the payout from the option.

Confused? Maybe the video will help!


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