What Is an Uncovered Put?

A naked put is a put option contract where the option writer does not hold the underlying position, in this case a short equity position, to cover the contract in case of assignment.

What does it mean to sell an uncovered put?

A naked put is when a put option is sold by itself (uncovered) without any offsetting positions. When put options are sold, the seller benefits as the underlying security goes up in price. ... A naked put's breakeven point for the writer is its strike price, plus the premium received.

What is an uncovered option?

Uncovered options are sold, or written, options where the seller does not have a position in the underlying security. Selling this kind of option creates the risk that the seller may have to quickly acquire a position in the security when the option buyer wants to exercise the option.