Naked Option Strategies

Naked option strategies

An unhedged strategy making exclusive use of one of the following: Short call strategy (selling or writing call options), and short put strategy (selling or writing put options). By themselves, these positions are called naked strategies because they do not involve an offsetting or risk-reducing position in another option or the underlying security. Related: Covered option strategies. Antithesis of covered option.

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Naked Option Strategies

An investment strategy in which one enters a position on option contracts without other, opposite options to hedge the risk. Unlike more complex spreads and straddles, which involve the purchase or sale of multiple options in order to profit in different ways, naked options are straightforward calls or puts. An investor using naked option strategies makes a profit or loss depending on the movement of the underlying asset. Naked options are also called uncovered options. See also: Covered options.