What Is a ‘Naked Option’ and What Is Its Risk Profile?
A naked option is a short option position where the seller (writer) does not own the underlying asset or have an offsetting position. This is typically done to collect the premium.
The risk profile is theoretically unlimited for a naked call, as the underlying asset's price can rise indefinitely. For a naked put, the risk is substantial, as the price can drop to zero.
This high-risk strategy is only suitable for experienced traders.
