naked option

Definition

A put or call that is written by an investor who does not own a position in the underlying asset that locks in the cost of delivering the shares if the option holder elects to exercise the option. Trading naked options can be a highly risky business because if the option holder chooses to exercise his or her contractual right to buy or sell the underlying assets at the specified price, the grantor will be forced to acquire them on the open market and at the prevailing price. Compare to Covered Call; Covered Put.

Use naked option in a sentence

You may want to try and do some research on a naked option and decide if it is right for you at that time.

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Sam was outline the naked option as available for the company and his perspective was certainly impartial as he did not have a stake in the company.

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We were gambling with the naked option, but the play seemed like a good one at the time, and we kept our fingers crossed it wouldn't backfire on us.

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naked call uncovered option