When to Buy Naked Options

Buying naked options is a maneuver to take advantage of correct market timing. Perhaps the only reason you may want to buy a naked call or put option is when you expect a significant change in the price of the stock in a given period of time. The following conditions sum up the timing for buying a naked option:

The underlying stock is expected to move in a particular direction
An option volatility that is low is a positive in buying naked options
Time decay is minimized


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