With apologies to David Mamet and his movie “Heist”, we’ve chosen the title for this article because everyone surely does need money in this market environment, and using naked put options under the right circumstances will get people that money.
(Photo: "Heist" from Warner Bros., from IMDB.com)
We take a very specific approach to selling naked puts, however. Even in bull markets, one does not want to sell naked puts against any old stock just because the premium is juicy. That can lead to catastrophe, because high premiums correlate to high volatility, and high volatility stocks are usually that way for a reason. That is, they carry more risk than others.
Generating income from selling naked puts requires careful screening for the right stocks to sell naked puts against. For us, that means value stocks – stocks that are already trading at what we consider to be below intrinsic value. That way, should the stock in question get put to us, we are happy to own it.
The market volatility and uncertainty creates a tremendous opportunity to generate income from selling puts, but one must be more careful than ever before to choose the right stocks. In this case, Booking Holdings (NASDAQ:BKNG) is the right stock, and the following paragraph explains exactly why.
It's a pretty bold statement that BKNG stock is going to be fine for a country that appears to be ready to let both its airlines and hotels fail. Yet we don’t believe the travel industry will fail. That’s a critical element to our thesis.
If you truly believe that airlines and hotels will cease to exist, stop reading this and pick up some science fiction, because there are over 10 million jobs in those two industries alone, and they make up a massive part of our economy. If you’ve made
