Naked Option – Florida Breach of Fiduciary Duty, Negligent Supervision and Mismanagement FINRA Arbitration and Litigation Attorney:
A Naked Option is an option for which the buyer or seller has no underlying security position. A writer of a naked Call Option, therefore does not own a Long Position in the stock on which the call has been written. Similarly, the writer of a naked Put Option does not have a Short Position in the stock on which the put has been written. Naked options are very risky and are not suitable for many investors, especially risk adverse investors. However, naked options can be potentially rewarding. If the underlying stock or stock index moves in the direction sought by the investor, profits can be large, because the investor would only have had to put down a small amount of money to obtain large returns. On the other hand, if the stock moves in the opposite direction, the writer of the naked option could be subject to huge losses.
Please keep in mind that the information being provided in this post is for educational purposes only. It is not designed to be complete in all material respects. Thus, it should not be relied upon as providing legal or investment advice. If the reader has any questions relative to this post, you should contact a qualified professional
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