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    Question

    What is the term used for options that do not have

    offsetting positions?
    A Open Options Correct Answer Incorrect Answer
    B Market Options Correct Answer Incorrect Answer
    C Temporary Options Correct Answer Incorrect Answer
    D Naked Options Correct Answer Incorrect Answer
    E Long Term options Correct Answer Incorrect Answer

    Solution

    Naked or uncovered options are those which do not have offsetting positions, and therefore, are riskier. 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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