Naked Option
A sold option with no hedge behind it — small fixed reward against large, open-ended risk.
Definition
Naked option (also called an uncovered option) is an option you have sold without holding an offsetting position — no underlying shares, no opposing option leg, no hedge. The seller collects the premium up front but takes on the full obligation of the contract if it is exercised. A naked call has no underlying to deliver; a naked put has no covering position to absorb a fall.
Why it matters
Naked selling reverses the usual options risk profile: the maximum gain is the premium received, while the loss can be very large — theoretically unlimited on a naked call and bounded only by a near-zero underlying on a naked put. Because of this exposure, exchanges and brokers require substantial margin, and SEBI-regulated brokers may restrict naked writing for retail accounts. It demands strict risk control and position sizing.
Example
You sell a NIFTY 24,500 call for a premium of 60 points (illustrative) without owning any offsetting position. If NIFTY stays below 24,500 at expiry you keep the 60. But if NIFTY rallies to 25,000, the call is deep in the money and your loss grows far beyond the premium you collected.
See it live
Read live premiums and open interest on TradePulse's option chain before you ever write an uncovered option.