when executed in this manner a covered put works in virtually the same way as a covered call strategy with the primary difference being that the individual executing the covered put strategy expects to profit from the mildly declining price of a security while a covered call trader expects to profit from a mildly rising price that is because the underlying position for covered puts is a short instead of a long position and the option sold is a put rather than a call 
special considerationsa naked put strategy is inherently risky because of the limited upside profit potential and theoretically a significant downside loss potential the maximum profit is only achievable if the underlying price closes merely at or above the strike price at expiration further increases in the cost of the underlying security will not result in any additional profit the maximum loss meanwhile is theoretically significant because the price of the underlying security can fall to zero the higher the strike price the higher the loss potential however in more practical terms the seller of the options will likely repurchase them well before the price of the underlying security falls too far below the strike price based on their risk tolerance and stop loss settings using naked putsbecause of the risk involved only experienced options investors should write naked puts the margin requirements are often quite high for this strategy as well due to the propensity for substantial losses investors who firmly believe the price of the underlying security usually a stock will rise or stay the same may write put options to earn the premium if the stock persists above the strike price between the time of writing the options and their expiration date then the options writer keeps the entire premium minus commissions 