To be accurate I want to add the following points:
1. Loses money in a down market. Sounds like duh and many would say so would buying and holding. But in a downward market most people using this strategy are constantly selling puts and getting put piece of shit stocks and rev up the strategy because they keep taking losses. Rather than step away from this strategy they just keep selling puts and getting assigned and locking up capital in shit dying stocks and actually end up in a much worse position. Why..because they are too afraid to actually realize it works poorly in this environment and they should look to bearish strats or something less risky. Most never do and lose a lot.
2. In a strong bull market this strategy sucks. While the markets are screaming higher you are making pussy returns selling OTM puts, never really getting assigned and woefully underperforming Buy and Hold. Most are not smart enough to recognize the raging BULL and since they are collecting premium monthly they think they are trading geniuses while blind monkeys are making money doing nothing. If the market is screaming higher you should be long long long by whatever means, not selling extremely high risk/limited reward puts.
3. This strategy is best for sideways or slow moving markets. Most investors are bored with these kind of markets and never really maximize the chop to collect premiums, maybe get assigned a few times and get to sell more premium and grow an account while everyone else is getting sideways chopped. You want a boring market to make the most money relative to everyone else but naked option sellers usually leverage up on raging volatile markets which lead to the points I raised in #1 and #2 above.
4. If you cannot successfully analyze and pick stocks, then you cannot do this strategy. Options are derivatives means their value is derived from a strong knowledge of something other than the options themselves, be it the underlying stock, volatility etc. So if are new to stocks and options you will lose money. Most dont understand that but if you cannot pick the stocks correctly, how can you sell naked puts and take ownership and avoid owning crap.