Question
Options, which do not have offsetting positions, are
calledÂSolution
Naked or uncovered options are those which do not have offsetting positions, and therefore, are more risky. On the other hand, where the option writer has corresponding offsetting position in the asset underlying, the option is called covered option. Writing a simple uncovered (or naked) call option indicates toward exposure of the option writer to unlimited potential losses for earning more premium.
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