Glossary term
Naked Option
A short option sold without owning the underlying or holding an offsetting position; carries undefined (potentially unlimited) risk.
A Naked Option is a short option sold without owning the underlying or holding an offsetting long option to cap the risk. A naked call carries theoretically unlimited loss because the underlying can rise without bound; a naked put risks the full strike value. Closelook does not trade naked options — every short position is either cash-secured, covered, or part of a defined-risk spread. See Cash-Secured Puts 101.