First of all, I have zero knowledge of derivatives, so if the following doesn’t seem coherent, bear with me.
I have seen a video, in which the person who is speaking wants to buy Bankbees, but as it is trading at a higher price, he does not want to buy Bankbees, so he invests in cash secured puts, he shorts. He sells next month naked put option. He sells 1 lot put option.
He does not wait for the Banknifty to come down, and that he does not buy Bankbees until Banknifty falls, and he invests in these puts and makes money through time decay, while waiting for Banknifty to come down.
After his OTM put changes to ITM, he will close the put and buys Bankbees.
He says that this cash secured puts strategy helps with good stocks, or with index, and for investors who want to buy only at a certain price, but can make money with time decay.
So can you members who do this regularly explain the basics of how this works?