Rolling Into Covered Calls Rescue Strategy For Deep In The Money Naked Puts

Many put selling investors find themselves unable to decide how to close or roll a naked put that has fallen in the money. Rather than getting out early a lot of naked put sellers hope that the downturn is temporary and the stock will come roaring back and leave their naked puts back out of the money. This rarely happens when a stock is falling which is why for put sellers the importance of having a plan and the importance of strategy just cannot be understated. Both of these are key aspects of put selling.

When put selling is engaged in, often an investor is selling put options for small premiums. Earning $1.00 only to watch it plummet and need to be bought back for $5.00 or $6.00 is gut wrenching and if you do enough of them they can wreck a put selling portfolio.

Rescuing In The Money Naked Puts

In this article I look at a different strategy of Rolling Into Covered Calls when naked puts have gone deep in the money and the cost to buy them back will be damaging. This is a strategy for investors who are bearish on the stock they are holding sold puts against but failed to get out early from their trade and are stuck holding deep in the money naked puts.

This strategy is designed for investors to work their way out of the losing position without actually committing capital to owning the underlying stock. Basically the Rolling Into Covered Calls is a strategy of replicating covered calls without owning any actual shares while earning superior income than giving up the naked put positions and accepting assignment on stock.

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