Selling naked puts may be one of the riskier things a retailer investor can do (just short of shorting (pun intended) and a few other items like naked calls).
A naked put is an options trading strategy where an investor sells (writes) a put option without holding a short position in the underlying stock or enough cash to cover the potential purchase if assigned. This strategy is considered high risk.
To limit that risk for my family I would take those proceeds and intentionally allocate them to less risky buckets, and how they were invested changed over time. Either way, I completly stopped when two positions took a right turn on me and all of sudden I was holding a ton of shares of 2 stocks that I did not want to hold for the long term (DLTR and DG). I was especially pissed at myself because I broke solid rules I had built for myself to not be in that position. It seems that I am on the other side of those trades, eeking out a tiny profit along the way.
So I get to start reinvesting the premiums earned once again!
All about Debt
At the beginning fo this year, I put my debt into tiers wherein Tier 1 represented the worst kind of debt, consumer debt, Tier 2 represented longer term debt that is low, and associated with a general good economic decision (for example solar panels), and Tier 3 is mortgage debt.
My current break down of weekly profits will be as follows:
- 20% of any weekly proceeds are going to be ignored. This will go against the debt associated with those positions that have been put to me. As soon as I am rolled out of all the positions that are providing a margin debt then I will reallocate this 20% probably to cash, money market or ETF.
- 80% of any weekly proceeds will be paid to Tier 1 debt.
As soon as all Tier 1 debt is paid off it is my goal to reallocate a small percentage to Tier 2 debt, and then a larger percentage to underlying equities with some type of split between Dividend ETFs and stable dividend paying equities.
