BROWSE

Naked Put

Definition

A naked put is a put option where the option writer does not have sufficient liquidity to cover the contracts in case of assignment. No amount of underlying stock will satisfy assignment, because the seller/writer is forced to accept the underlying in exchange for cash, even if the cash must come by way of a margin call by the seller's broker. If the option buyer doesn't exercise on or before expiration, the seller keeps the option premium. Due to the risks involved, put writing is rarely used alone. Investors typically use puts in combination with other options contracts.

What is 'Naked Put'

A put option whose writer does not have a short position in the stock on which he or she has written the put. Sometimes referred to as an "uncovered put."

Explaining 'Naked Put'

Naked puts are very risky since the writer can lose big if the underlying asset moves opposite to the desired direction. But, profits are huge if the underlying asset moves in the right direction.


Further Reading


The economics of IPO stabilisation, syndicates and naked shorts
onlinelibrary.wiley.com [PDF]
naked economics Undressing the Dismal Science fully revised and updated CHARLES WHEELAN Foreword by … to tell them the prices at which they should trade put and call … Ordinary consumers will also find that economics can illuminate many perplexing everyday issues …

Leadership, hegemony, and the international economy: Naked emperor or tattered monarch with potential?Leadership, hegemony, and the international economy: Naked emperor or tattered monarch with potential?
academic.oup.com [PDF]
naked economics Undressing the Dismal Science fully revised and updated CHARLES WHEELAN Foreword by … to tell them the prices at which they should trade put and call … Ordinary consumers will also find that economics can illuminate many perplexing everyday issues …

A fig leaf for the naked corporationA fig leaf for the naked corporation
link.springer.com [PDF]
naked economics Undressing the Dismal Science fully revised and updated CHARLES WHEELAN Foreword by … to tell them the prices at which they should trade put and call … Ordinary consumers will also find that economics can illuminate many perplexing everyday issues …



Q&A About Naked Put


What are some risks of writing a Naked Put?

The writer can lose big if the underlying asset moves opposite to the desired direction.

What is a Naked Put?

A Naked Put is an option whose writer does not have a short position in the stock on which he or she has written the put.

How much money can you make with a Naked Put?

Huge profits are possible if the underlying asset moves in the right direction.

Leave a Reply

Your email address will not be published. Required fields are marked *