How Does a Naked Put Option Expose a Trader to Risk?
Selling a naked put obligates the seller to buy the underlying asset at the strike price if the option is exercised. The risk is that the underlying asset's price could fall dramatically, potentially to zero.
The maximum loss is the strike price multiplied by the contract size, minus the premium received. This is a substantial risk, as it requires significant capital commitment.
Glossar
Naked Put
Strategy ⎊ A Naked Put is an options trading strategy where the investor sells a put option without holding a corresponding short position or the underlying asset, obligating the seller to purchase the asset at the strike price if the option is exercised.
Naked Put Option
Position ⎊ A naked put option position involves selling a put option without holding a corresponding short position in the underlying asset.
Strike Price
Reference ⎊ The Strike Price is the predetermined reference level set at the contract's inception against which the underlying crypto asset's spot price is compared at expiration or exercise.