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7 lut 2024 · An uncovered option, or naked option, is an options position that is not backed by an offsetting position in the underlying asset. Learn the risks of this strategy.
17 maj 2024 · A naked option, also known as an uncovered option, is created when the seller of an option contract doesn't own the underlying security that's needed to meet the potential obligation that results...
30 kwi 2024 · 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.
To learn more about Merrill's uncovered option handling practices, view Naked Option Stress Analysis (NOSA) (PDF). Early assignment risk is always present for option writers (specific to American-style options only).
NOSA evaluates an uncovered option account’s collateral by valuing all of the margin, non-option securities in the account. The collateral value of a long margin holding is less than the total market value of the security.
Selling an uncovered call based on a neutral-to-bearish forecast requires both a high tolerance for risk and trading discipline. A high tolerance for risk is required, because risk is theoretically unlimited.
Sellers of uncovered puts must consider the risk of early assignment and should be aware of when the risk is greatest. Early assignment of stock options is generally related to dividends, and short puts that are assigned early are generally assigned on the ex-dividend date.
