Is a naked put really that risky
"So, yes, you may be having the inevitable epiphany where you realize that options can synthetically replicate the same risk profile of owning stock outright. Allowing you to manipulate risk and circumvent margin requirement differences amongst asset classes. Naked short puts are analogous to a covered call, but may have different (lesser) margin requirements. This allows you to increase your risk, and the broker has to account for that. The broker's clientele might not understand all the risks associated with that much leverage and so may simply consider it risky ""for your protection"""
"I don't know what the fuck has happened to Vice, honestly.   The Vice I knew was that of Shane Smith going to Liberia and risking his life interviewing ""General Butt Naked"".  Not this click-bait generating, 5 second attention span catering shit ...  /rant." "And what a difference a day makes and as the dust begins to settle things become a little clearer.  The big take away from the Orange Orangutans buffoonery at the United nations was that ["" Hey!! we really don't have a Missile shield""](https://www.rt.com/usa/403895-us-may-not-be-capable-shooting-down-missile/) ""heh heh . .yeah . .we was just funning with you and our Nato allies, actually we buck naked""  So North Korea is off the Menu, they get to live free and prosper and grow and thrive, minus the occasional irritating yip yap which will eventually diminish and disappear altogether.  So That leaves Pakistan and Iran . . . well Pakistan does not have ICBMs but it does have nukes and tactical ones, so that could do some real damage in Afghanistan, subs could do some real damage, that pretty Island Deigo Garcia could be struck  On the other hand, Iran it seems really can't do much at the present time but poses a threat to Israel and has missile tech that reaches Israel and if Iran was to go nuclear, well that would pretty much be end game.  So in America's sort routine to externalize internal problems by choosing the easiest problem to solve  #Congratulation IRAN . .You are IT!!!  You better hope those S-400s work, I reckon you have about 3-6 months  Pakistan can breath a sigh of relief . .for the moment  . .but do remember First Iran was an American Ally, then Iraq, then they destroyed Iraq, now Iran, after Iran, its you . . .over the next decade the US will neutralize your edge in Air superiority, as good as your pilots are, technology will eventually win, so you need alternates, the SU-47 is looking real good, and when the choice comes between a nation with ICBMs and one with out . .Guess who wins?  Yah .. you better spend the next 10 years developing ICMBs and for the love of god, if you are going to pick a leader, don't pick one who spends all his time making idiotic infrastructure projects to enrich his own family instead of preparing for this day that was to come, any blind man could see.  And while all the hallabaloo was going on . .the Fed under the cover of dark tried to slip one by . . . we are watching you gramma . . .It will be interesting to see how you sell your dirty laundry in a non-existent market, I think you are going to fuck this up and the whole wobbly construct is coming down and when it does  Nobody is going to need ICBMs" "I think what you really want to look into is put options. You can essentially replicate the same thing, without worrying about margin calls. Check out this site http://www.fundamentalfinance.com/options/options-basic-charts.php a quick glance seems to show it to be pretty good.  The way you would limit downside risk is to buy a put option, allowing you to sell anytime within the next n months for the current price (assuming american). This will allow you to limit downside risk, however, potential profits do go down due to fees as another answer suggests this could be cost prohibitive. This type of strategy is also known as a ""protective put"". http://www.optionseducation.org/strategies_advanced_concepts/strategies/protective_put.html If you wanted to be more refined you could use Ak's bands, although you have to be looking for that specific outcome. Also due to complexity, this can become a taxing (in terms of time invested) and risky (if you are wrong) investment. Either way I think you need to study payoff curves a little more." In order to short a stock, you have to borrow the number of shares that you're shorting from someone else who holds the shares, so that you can deliver the shares you're shorting if it becomes necessary to do so (usually; there's also naked short selling, where you don't have to do this, but it's banned in a number of jurisdictions including the US). If a stock has poor liquidity, or is in high demand for shorting, then it may well be impossible to find anyone from whom it can be borrowed, which is what has happened in this instance. I sell a put for a strike price at the market. The stock rises $50 over the next couple months. I've gotten the premium, but lost the rest of the potential gain, yet had the downside risk the whole time.  There's no free lunch.  Edit - you can use a BS (Black-Scholes) calculator to create your own back testing. The calculator shows a 1% interest rate, 2% yield, and 15% volatility produce a put price almost identical to the pricing I see for S&P (the SPY ETF, specifically) $205 put. No answer here, including mine, gave any reference to a study. If one exists, it will almost certainly be on an index, not individual stocks. Note that Jack's answer referencing PUTX does exactly that. The SPY ETF and it put options. My suggestion here would, in theory, let you analyze this strategy for individual stock options as well.  For SPY - With SPY at 204.40, this is the Put you'd look at -  12 times the premium is $33.36 or 16% the current price. The next part of the exercise is to see how the monthly ups and downs impact this return. A drop to $201 wipes out that month's premium.  It happens that it now March 18th, and despite a bad start to the year, we are at break-even YTD. A peek back shows In Dec you picked up $2.87 premium, (1.4% the current price then) but in Jan, it closed for a loss of $12. Ouch. Now, if you started in January, you'd have picked up 2 month's premiums and today or Monday sell the 3rd. You'd have 2.8% profit so far, vs the S&P break even.  Last, for now, when selling a naked put, you have to put up margin money. Not sure how much, but I use percent of the value of underlying stock to calculate returns. That choice is debatable, it just keeps percents clean. Else you put up no money and have infinite return. Here's a start at a high level: I have a few friends who have made a killing on GLD, and write options to make money off of the investment without incurring the capital gains penalties for selling. That's a little out of my comfort zone though. "You have already indicted in another question, titled Which risk did I take winning this much?, that you did not understand (1) Why a previous trade made you as much money as it did; nor (2) How much you could have lost if things went a different way. You were, in that other question, talking about taking short position, without understanding (apparently) that a short position can create losses exceeding the value of your initial investment. Can one make money doing day trading? Yes, an educated investor may be able to prudently invest in short term positions making knowledgeable judgments about risk, and still make money. Can you make money doing day trading? Well, maybe. You have in the past, in what you described in a previous post as ""winning"". So even in your own eyes, you were effectively gambling, and got lucky. Perhaps the more relevant questions you can ask yourself are: Can you lose money doing day trading? And, most importantly, Are you more likely to lose money day trading, or consistently make money by taking on reasonable and educated risks?" Nearly 3 years ago, I wrote an article, Betting on Apple at 9 to 2 which described a bet in which a 35% move in the stock returned 354% on the option trade. Leverage works both ways, no move, or a slight move down, and the bet would have been lost. While I find this to be entertaining, I don't call it investing.  With $2-$3K, I recommend paper trading first, and if you enter option trades, no one trade should be more than 20% of this money. If you had $50K in betting money, no position over 10%.