The term ____ indicates that the option writer does not own the underlying stock on which the option is written.
A) off-cover
B) naked
C) covered call writing
D) European option

Question

The term ____ indicates that the option writer does not own the underlying stock on which the option is written.
A) off-cover
B) naked
C) covered call writing
D) European option

Quizplus · Accepted Answer

Naked option writing, also known as uncovered option writing, involves selling options without owning the underlying assets, such as stocks. This strategy can be risky, as the writer may have to purchase the underlying asset at a higher price to fulfill their obligation if the option is exercised, resulting in significant losses.

The Term ____ Indicates That the Option Writer Does Not