Selling naked puts is one of the safest option strategies.
No way.
Other than the general end result is similar as you pointed out.... the comparison ends there, and I certainly would NOT call a naked put "one of the safest option strategies"...
For starters, in writing a naked put, you are now liable for the dividends that the company may pay.
While statistically, 75 % (or more), of the options expire worthless, there is always the potential in writing a naked put that the loss would be unlimited (minus the premium received) --contrary to writing a covered call (which you are comparing it to), where the only possible scenario to suffer a loss is if you structure the strike price below your basis.
The fact that in a covered call you are limiting your gain, to the size of the premium, plus the difference in the strike price and your basis, (if you set it up that way), the potential additional gain, is not a loss, it is simply leaving money on the table.... you can't lose what you did not have to begin with. It is a mater of accepting risk, or limiting same, in exchange of a pre-determined profit.
The limitation in the gain is the price to pay as form of insurance against a drop in the stock price.... but remember that you received a premium for said limitation.
It is functionally equivilant to selling covered calls.
Indeed, except that in selling naked puts there are less commissions to pay. (that is a positive, for writing the put), but remember, you are liable for dividends, and there is no limit to your possible loss.
However, as I said, I like to keep things with a minimum of risk.
A naked put does not accomplish such, potentially there is no limit to your loss.... particularly in this day and age of the Internuts....
while there are defensive moves, (such as closing the position before it eats you alive), in a fast market, you can be in the hole substantially before being able to close the position.
Lastly, a naked put requires daily observance, minute by minute-- any intraday news, or similar that would cause the stock to move strongly....and you are toast. Writing a covered call is by design on "auto-pilot".... unless the market drops dramatically, at which time you can close the sold covered called position at a profit, and then if you expect a rise in the underlying to a specific point, then repeat the sold call before expiration during the same month. (I have done it).
The use of bollinger bands is a very helpful indicator to use as a trigger point for the sale and buy-back of the calls in question.
I would not like to have a naked put position against, say... an Amazon.com, particularly in those days of 15 - 25 points swings in the stock. --no way, profitable (limited), if the move is in your favor, but very destructive if the move is against you.
Obviously volatility and the amount of time left before expiration will affect the degree of risk in the naked puts... but still they are open to a greater loss than a covered call.
My opinion only.
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