naked option

The alternative is a naked option, where the seller has no offsetting position.

And two years later, he was scalded by naked options when the stock market dipped dramatically.

Then, her lawyer said, the firm quickly settled with her two sisters and mother, and curbed the sale of naked options.

Naked Went the Option What is a naked option?

In a naked option, the writer has no offsetting positions, whereas covered options are contracts backed by the shares underlying the options.

Whatever the textbook rationale, the whole object is to blow smoke in regulators' eyes - to produce a financial decoy that walks like a gilt-edged bond but boogies like a naked option.

It is more dangerous, as the option writer can later be forced to buy the stock at the then-current market price, then sell it immediately to the option owner at the low strike price (if the naked option is ever exercised).

We need, at the heart of the proposals which you recently presented, Commissioner, to adopt rules to regulate transactions which are highly obscure and, as such, subject to increased systemic risk, such as the market in over-the-counter derivatives and naked options.

A few years ago, the Dean Witter office in Sarasota, Fla., advised a schoolteacher, Suzanne Hutcheson, to write naked options on stocks or stock indexes, exposing her to far greater risks than if she bought the securities directly, her lawyer said.

One of Lake's favorite options trading tactics was writing uncovered put and call options, or "naked options," in which he agreed--for a price of course-- to buy stocks at a certain price that he didn't have the money to buy, or sell stocks that he did not yet own.