Uncovered Option

  

Categories: Derivatives, Stocks

See: Naked Option.

Uncovered. Naked. Exposed.

A covered option? Like...when you own 1,000 shares of Disney, now trading at $150 and you sell an option to buy it to someone with a strike price of $160 for 2 bucks. That option you sold, while you owned the stock? It was covered, because you owned the underlying stock. So the worst that coulda happened was that the stock was called because Disney stock went up so much. If it "only" went up to $162, you broke even.

But uncovered, way more risk of bad things happening to you when the option gods trade the other way.

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