Please explain the difference between selling a naked put and cash secured put. Is the risk lower with cash secured since no margin is involved?
I bought this book years ago. Its mostly about selling DOTM in commodity futures options. Very vague and lots of misinformation regarding optionality. Overall a weak book about options.
There is no difference. The trader decides how much cash he wants to put aside for option position between the required minimum and necessary maximum ( which is a maximum loss as in cash secured put ).
With a cash secured put, the risk is lower for the broker. "Cash secured" means that the account has enough cash to buy the stock if the put is assigned, without using margin, and without having to liquidate other positions that might not provide enough cash if they suddenly drop in value. Some brokers allow selling cash secured puts in a cash account. A truly naked put implies that you don't have enough cash to buy the stock if the put is exercised. That means that the broker has to evaluate the risk, and determine whether your account has enough equity to support the position. Brokers view a naked put as very similar to a naked call or short stock. The risk is not unlimited, because the stock cannot go below zero. But if the broker doesn't keep an eye on it, it is possible that you could lose more than the total equity in your account, and the broker would have to eat the excess loss. With a cash-secured put, that can't happen. BMK
Yes, you can surely do that. Trying new things can be challenging and all you need to have is the right mindset for it.
No f'ing way am I putting stops on options. Talk about bad fills. You've gotta be nuts to use stops on options.