Naked option

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A naked option strategy is an unhedged strategy making exclusive use of either a short call strategy (selling or writing call options), or a short put strategy (selling or writing put options). These positions are called naked strategies because they do not involve an offsetting or risk-reducing position in another option or in the underlying security. [1]

A short call position is uncovered if the writer does not have a long stock or long call position. A short put position is uncovered if the writer is not short stock or long another put.[2]

It is the antithesis of a covered option.

References

  1. Naked option strategy. Market Trader Glossary.
  2. options education glossary:naked uncovered option. Options Industry Council.