A Naked Put, also known as an uncovered put or short put, is a type of options trading strategy in which a trader sells a put option without having a short position in the underlying asset. This means that the trader is essentially "betting" that the price of the underlying asset will not fall below the strike price of the put option.Here's how it works: -1- The trader sells a put option at a certain strike price and receives a premium from the buyer.2- If the price of the underlying asset stays above the strike price, the option will expire worthless, and the trader will keep the premium as profit.3- If the price of the underlying asset falls below the strike price, the buyer of the put option will exercise their right to sell the underlying asset at the strike price. The trader will then be obligated to buy the underlying asset at the strike price, potentially incurring a loss.It's important to note that the naked put strategy is considered to be a high-risk strategy, as the trader can potentially lose more than the premium received if the price of the underlying asset falls below the strike price. Therefore, it is recommended that traders only use this strategy if they have a high level of risk tolerance and are comfortable with potentially incurring significant losses.In summary, A naked put, also known as an uncovered put or short put, is a type of options trading strategy in which a trader sells a put option without having a short position in the underlying asset, this means that the trader is essentially "betting" that the price of the underlying asset will not fall below the strike price of the put option. The strategy is considered to be a high-risk strategy, as the trader can potentially lose more than the premium received if the price of the underlying asset falls below the strike price.
