Naked Option
Also called: naked call, uncovered option, naked short option
A naked option is one sold without holding the underlying or the cash to cover it. A naked call is the most dangerous common retail position in finance: the premium you collect is capped, and the loss if the stock triples is not. Brokers demand heavy margin for it and many won't permit it at all. The payoff shape — small frequent gains, rare unlimited loss — is why the strategy looks brilliant right up until it doesn't.
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