Uncovered put

Definition:

A short put option position in which the writer does not have a corresponding short stockposition or has not deposited, in a cash account, cash or cash equivalents equal to the exercise value of the put. The writer has pledged to buy the asset at a certain price if the buyer of the option chooses to exercise it. Uncovered put options limit the writer's risk to the value of the stock (adjusted for premium received.) Also called "naked" puts.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Buying the index

Purchasing the stocks in the S&P 500 in the same proportion as the index to achieve the same return.

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