NAKED PUT Meaning and
Definition
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A naked put refers to a financial option strategy where an investor sells a put option without owning the underlying security. In this strategy, the seller, or writer, of the put option believes that the price of the underlying security will remain relatively stable or increase in value. By selling the put option, the writer takes on the obligation to buy the underlying security at a predetermined price, known as the strike price, if the option holder decides to exercise their right to sell the security.
The term "naked" in naked put implies that the seller does not own the underlying security to hedge against potential losses or fulfill the obligation upon exercise. This makes the strategy more speculative and exposes the writer to potentially unlimited losses if the price of the security drops significantly.
Naked puts are typically used by experienced options traders who have a high-risk tolerance and in situations where they are confident in the stability or upward movement of the underlying security's price. The goal of selling a naked put is to profit from the premiums received by selling the option while avoiding the need to purchase the underlying security.
It is important to note that naked put writing carries significant risks and should only be undertaken by individuals with a thorough understanding of options, the underlying securities, and the potential outcomes of the strategy.
Common Misspellings for NAKED PUT
- baked put
- maked put
- jaked put
- haked put
- nzked put
- nsked put
- nwked put
- nqked put
- najed put
- named put
- naled put
- naoed put
- naied put
- nakwd put
- naksd put
- nakdd put
- nakrd put
- nak4d put
- nak3d put
- nakes put
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