Naked Calls & Naked Puts

A sold (short) option is an obligation. It is 'covered' when something neutralises that obligation: shares behind a short call, or the full cash behind a short put.

Naked — also called uncovered or bare — means you sell the option with neither. You hold only the obligation and the premium you collected.

Brokers gate this behind their highest approval tier and charge real margin against it, because nothing in the trade itself caps the loss.