A naked option position is where the seller of a call (put) has no offsetting long (short) position in the underlying stock. Naked option positions are for more experienced traders due to the significant risk they entail.
American Style: Because American Style options can be exercised at any time up until expiration, naked short option positions are at risk of early assignment.
European Style: Because European Style options can only be exercised at expiration, there is no risk of early assignment on naked short positions.
Return to the main options glossary page to learn more terms.