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Glite Dictionary
naked option

naked option

9.9
To sell a right to buy or sell a stock without owning it and risk large losses
  • noun
  • /ˈneɪ.kɪd ˈɒp.ʃən/
  • Specialized
translation icon : opción desnuda
  • He decided to sell naked options on the stock, anticipating that the price would decline.

Examples

  • So our next slide here is on naked options positions.

  • Neither will allow naked options.

    Blog text (2)

  • Traders who use naked options often face greater risks due to not owning the shares.

  • Investing in naked options can lead to substantial losses if the market moves against you.

Antonyms

covered option
  • Specialized
8.6

A way to sell an option while you already own the shares the buyer may buy

How Risky

short selling
  • Specialized
3 6.6
naked option
  • Specialized
9.9
long
  • Specialized
127 7.7
covered option
  • Specialized
8.6

Surface Forms

naked option singular
naked options plural

Morphology

naked + option

The phrase is compositionally transparent: 'naked' means unprotected/exposed and 'option' is the financial right, so a learner who knows both words can infer an option held or sold without protective coverage. The risk implication follows directly from being 'unprotected', and equivalent formulations exist in other languages, supporting immediate understandability.

Etymology

The term naked option comes from the idea of being naked or without cover when you sell an option. Because you do not own the underlying stock you are 'exposed' to big losses, so the name warns that this trade carries higher risk.