naked option

naked option

n.

An opening transaction in an option when the underlying asset is not owned by the investor writing the option. If a stock on which such an investor has written a call option is then called by the option holder, the investor must purchase shares in the market for delivery and is therefore caught naked. Also called uncovered option.

Thesaurus

Noun

1.

naked option - a put or call option for which the seller or buyer has no underlying security position option - the right to buy or sell property at an agreed price; the right is purchased and if it is not exercised by a stated date the money is forfeited