Naked put

A naked put (also called a uncovered put ) is a put option where the option writer (i.e., the seller) does not have sufficient liquidity (cash) to cover the contracts in case of assignment. No amount of underlying stock will satisfy assignment, because the seller/writer is forced to accept the underlying (from option buyer) in exchange for cash, even if the cash must come by way of a margin call by the seller's broker. If the option buyer doesn't exercise on or before expiration, the seller keeps the option premium. Due to the risks involved, put writing is rarely used alone. Investors typically use puts in combination with other options contracts.