Naked Put is a kind of put option where in the writer of the option does not hold a short position on the underlying security or the stock on which the put option is written. Naked put is also occasionally referred to as “uncovered put”.
Naked put option can be risky as the writer of the option stands to loose big sum of money if the price of the underlying security heads in the opposite direction as compared to the one desired by the writer. However, there also lies a chance to earn huge profits in case the price of the security heads in the required and intended direction.
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