Naked Option

An options position where the seller (writer) does not hold the underlying security to cover the obligation. Selling a naked call exposes the writer to theoretically unlimited losses if the stock price rises, while selling a naked put risks a loss equal to the strike price minus the premium received. Brokers require substantial margin for naked options, and the strategy was at the center of some of the most spectacular blowups in trading history, including the collapse of OptionSellers.com in 2018 when natural gas prices spiked.