Naked Position
Naked position is one of the security positions taken which does not have hedge against market risk. In case of naked position, the potential loss as well as potential gain is higher compared to the covered position.
Suppose that an investor has 100 shares of XYZ, and holds naked position in XYZ. Now, for covering the position, there is a choice to buy put options in order to have a covered position that would protect from the potential downside risk. However, in naked position, such a hedge is not taken.
Tags: covered position, naked option, naked position
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Naked Option
This is an option position where the buyer or seller has no underlying security position.
These kinds of naked options are very risky. Profits are huge if the underlying asset moves in the direction desired by the investor. On the other hand, a writer of a naked option can lose big if the underlying asset moves in the opposite direction.
Tags: naked option, underlying security position
Naked Call Options Trading Strategy
Naked call is an options strategy wherein the investor moves to write or sell the call options without having to own the underlying asset. The options are sold in the open market. This is exactly in contrast as compared to the covered call strategy. In a covered call strategy, an investor holds and owns a security which can be exercised as per the options contract.
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Tags: call option, naked call strategy, short call, uncovered call
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