Naked (Put or Call) Definition

Dictionary of Financial Terms

Also called uncovered options, but naked (pronounce it "nekkid" if it gets you interested in the investment) sounds like so much more fun. It's the opposite of covered call.

In this case of a call, a naked or uncovered situation arises when the writer (or seller) of an option does not have the underlying stock to fulfill his side of an options trade. That is, if the call buyer ends up with an option worth something, the seller needs to come through with the stock. If he's naked, he doesn't have the stock when he sells the call option.

A put is naked if the writer of the option does not have the financial resources available to buy the underlying shares at the strike price of the put.

Definitions of Financial Terms