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Short Naked Put

Analyzing the risk profile of a short naked put

Short Puts Compared To Long Shares

Now, let's compare the risk of short put strategies to that of 100 long shares. In a large sell-off, both strategies would begin to lose at the same pace. The short put, however, has slightly less total risk because of the credit received at trade entry. That credit, plus any distance between OTM strikes and the current share price, can drastically improve the short put's break-even. The profit potential of the short put may be lower, but the odds of the shares outperforming the call are significantly less than 50%.
Figure 1 Figure 2 Figure 3

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