In the current bullish market climate, it’s an opportune moment to delve into our Naked Put Screener.

To kick things off, let’s pinpoint stocks exhibiting above-average implied volatility.

Exploring Implied Volatility Rank

Implied Volatility Rank (IV Rank) serves as a litmus test to gauge whether a stock’s current implied volatility level stands high or low compared to the preceding twelve months.

An IV Rank of 100% signifies that the prevailing implied volatility level is at its peak in the past twelve months.

Conversely, an IV Rank of 0% denotes that the existing implied volatility level is at its nadir over the last twelve months.

During elevated IV Ranks, it proves judicious to explore option-selling strategies like naked puts, bull put spreads, bear call spreads, and iron condors.

Let’s scout out some large-cap stocks boasting an IV Percentile exceeding 60%.

Identifying Potential Stocks

The screener identifies stocks based on the following criteria:

• IV Percentile above 60%
• Market Cap above $40 billion
• Total Call Volume surpassing 2000

The listed stocks provide a foundation for further investigative work towards option selling.

Let’s transition to the Naked Puts Screener to glean additional insights.

In-depth Analysis with Naked Put Screener Results

Perusing the Naked Put Screener outcomes reveals candidates like Coinbase (COIN), Super Micro Computer (SMCI), Tesla (TSLA), Arm Holdings (ARM), and Nvidia (NVDA).

Moreover, the screener was tailored with specific parameters to refine the results:

• Market Cap exceeding $40 billion
• Days to expiration between 15-45
• Option volume surpassing 50
• Open Interest exceeding 100
• Moneyness between -15% to -5%

Let’s introduce an additional criterion of IV Percentile surpassing 60% and exclusively feature stocks with a Buy rating. The ensuing outcomes are:

Unpacking Cash-Secured Puts

One strategy to potentially secure ownership of a stock below its prevailing price involves a cash-secured put.

A cash-secured put represents a marginally less bullish tactic than outright stock purchase, leaning towards a neutral to slightly bullish stance.

This approach entails writing an at-the-money or out-of-the-money put option while concurrently earmarking sufficient cash to procure the stock.

The focal aim is either for the put to expire fruitlessly, retaining the premium, or to acquire the stock beneath the current price upon assignment.

Engaging in put option sales serves as a convenient entry point to the realm of options—a domain akin to covered calls and relatively comprehensible post-grasping the essentials.

It’s imperative for put sellers to acknowledge the possibility of being assigned 100 shares at the strike price.

Case Study: TSM Naked Put

For instance, selling the April 19th, $133-strike put option on Taiwan Semiconductor (TSM) would yield $261, retained by the trader.

If TSM descends below $133 by April 19th, acquiring 100 shares at $133 becomes mandatory. However, the effective net cost of the position would be $130.39, courtesy of the accrued option premium.

Admittedly, this stands 5.37% below the prior day’s closing price.

Should the stock maintain levels above $133 at expiry, rendering the put worthless, the trader garners a 2.0% return on capital at risk, equivalent to a 27.1% annualized return.

While analogous to stock holding in terms of risk during swift stock depreciation, the premium obtained helps mitigate losses.

The maximal loss would materialize if TSM plunges to $0, resulting in a $13,039 loss; nonetheless, most traders would curtail losses well before such an extreme.

Cash-secured puts present an enticing avenue to garner returns on robust stocks sans outright acquisition prerequisite.

Parting Thoughts

Should assignment ensue, investors acquire ownership at a discounted cost base, potentially initiating covered calls to further amplify income from the position.

The Naked Put Screener from Barchart stands as a valuable resource for uncovering potential option trade opportunities.

Note that options entail risks, and investors face the prospect of losing their entire investment. Thus, a prudent approach involves performing thorough due diligence and consulting with financial advisors before committing to any investment.