No, it’s not what you think. Its selling naked puts. Selling a naked put means that you are selling a put option on a stock that you do not own.
Here’s how it works. First you have to be approved with your broker to do this. Second you have to have enough funds in your account to purchase the stock you are agreeing to buy. You’ll need enough for at least 100 shares. That’s one contract.
So what you do is find a stock you wouldn’t mind buying. Say the stock is at $16. It would cost you $1,600 to purchase 100 shares. Instead of just buying the stock you would sell a put for $15. When you do this you are agreeing to buy the stock at $15 for a period of time, usually a month or so is how most people do this. You also collect a premium for taking on the risk. It may be between 1 and 3 percent.
Here is the risk. Say the stock skyrockets to $25. You miss the upside, but you still get to collect that premium and can do the same thing again another month. There is also a downside risk. If the stock tanks to $10 the option will be exercised and you will purchase it at $15. This is why it’s important to only do this on stocks you are sure you would like to own. Good luck trading.