Naked Position
Categories: Derivatives
See: Naked Call. See: Naked Put. See: Naked Option.
A naked position (and yes, we'd really have a field day with this one on Shmoop After Dark) is a derivatives trade that is not attached to anything else. It's bare. It's open. It's exposed.
Mainly, it's unhedged. So a naked anything is just a single thing. Most professional derivatives traders hedge their bets in almost everything. They might straddle a trade in selling a call along with buying a put or something like that, taking advantage of what's called skew...the gist being that there exist little arbitrage opportunities all the time in the markets that pros try to take advantage of.
When you're naked, you...can't. You're making a bet whose results depend entirely on your investing alpha, or smarts, or gut being...right. And that bet makes you feel...naked.