 Welcome back. In this video I want to go over a short-naked put. So we want to do a short-naked put when our market assumption is bullish. So we want the underlying stock future ETF to go up. We want implied volatility to be high because we're selling being a net seller of options here. Optimal time frame 30 to 60 days looking for a profit target of between 25 to 50 percent of max profit. Downside risk is the stock could go to zero. So you're you know that's the that's the ultimate risk. Obviously doesn't happen very often but that's you've got to look at it from an ultimate risk standpoint. In the upside risk obviously none because if we if the stock goes up we will be making money. The probability of profit will be at 70 plus percent when we initiate the trade. So the trade setup is we're simply going to sell one out of the money put and we're going to do that right around the 30 delta is where we like to do that. Time decay or theta positively impacts this position. So just like an iron condor or a strangle you can think of the you know the short-naked put is just the put side of a strangle. So let's go to the platform and take a look at an example. What we're looking at here is XRT this is the retail ETF. So you can see we've got an IV percentile of 52 so it's it's above 50 so we could consider that high implied volatility. One of the few high implied volatility vehicles that we have to have to choose from right now. But the other thing that I like about this as far as putting on a selling a short-naked put is look at this look at this massive down move this has had okay and and so you know I don't I don't like to get bullish on things when they're already you know hitting new all-time highs. I like to get bullish on things when they've had somewhat of a down move. Now it could be just a short-term down move like this or it could be a significant down move like we've seen here but either way we've got high IV the probabilities are going to play out over time so let's go to the trade tab and put this on. So we're simply going to go to the put side and we're gonna look for the 30 delta put. Now as you can see with XRT we've got a 26 delta and we've got a 36 so which one do I choose? I always like to default to the higher delta. It's gonna give you more premium you've got 82 cents versus 54. The the difference is you won't have quite as high of a probability of success so if you're looking for a little bit more high probability you could go for the 26 delta. If you're looking for more premium to collect you can go for the 36 it's really just a preference if you're kind of splitting hairs although that is a bit of a variance between these two strikes as far as the as far as the 26 all the way to 36 delta so a difference of 10 but but a lot of times you're just splitting hair hairs as far as which one you choose. Let's go ahead and choose the 40 so we simply right-click sell single and that's gonna populate right here so then we can take this over to the analyze tab and already got one in there so delete that one so what we've got here if we set our slice to the breakeven point make sure the date is set to the expiration date which in this case is 5 2017 and so what you'll see here is we've got a probability of just over 70% that this trade will will work out in our favor. Now remember when we manage these trades when we when we exit the trades for a percentage of max profit our percent our winning percentage is going to be much higher than this it's gonna be closer to the 80 85 maybe a little bit higher as far as our winning percentage but but that's just kind of our initial probability of profit if we held it all the way to expiration so I'm gonna go ahead and get this filled just do one contract for this example of the one other thing I wanted to show you was if you put the hash mark right on where prices you can see there's a positive theta component so remember this has a positive theta component to it and so that allows us to you know price stayed right here between now and expiration we're going to make money on this trade and that's we always want to we always want to have that component when we're when we're selling options if possible so that so we've got a 70 set 70% probability of profit we do have a you know it's kind of neutral to bullish we call this a bullish strategy because ultimately we will profit if it goes up quicker and so let's go ahead and place the trade so simply right-click confirm and send send and we got filled right at 82 cents so I ended the video after we entered the XRT trade but I thought I'd come back just a few days later we entered that trade on March 24th today is six days later March 30th prices moved up nicely for us got in at about when prices about $41 it's moved up to a little over a little over 42 so just a quick little move there so I want to show you we we are now at you know in the profit of a little over $45 max profit is 82 so that's over 50% of max profit and what caused that obviously was the move up but also look at what's happened to implied volatility since we put that on it's just it's just gotten crushed and so the move up and the move down and applied volatility both helped our position and so this is a quick profit that we took in just six days you know for this example we only did one contracts or making you know a profit of 45 46 bucks but you want to look at it on a percentage basis because if you have a small account you know this is going to be a bigger percentage of your account if you have a larger account obviously we would you would do more contracts than this but this is this is perfect I mean you know taking it off a quick over 50 percent of max profit in six days take those all day long so simply just right click create closing order buy straight at 35 cents confirm and send and we're out of the trade so I'm not going to show the closing trades in all these but I wanted to show that because it's just a perfect example of showing how quickly some of these can move in your favor with price and implied volatility hope that was helpful see you in the next video