Naked Put definition wrong at Wikipedia?

[ajacobson]

Characteristics and Risks of Standardized Options or as it is commonly known as the ODD is sent to every account. You might want to keep it handy. You can also get a PDF from the OCC website. It was slotted for an update Q4 of 21. It is a good resource for info like this and is rarely read. One caveat - it's been a long time since I read it - so include myself in the rarely read.

https://www.theocc.com/getmedia/a151a9ae-d784-4a15-bdeb-23a029f50b70/riskstoc.pdf;

 

[thecoder]

thecoder said:
And in the "Covered Put" case I wonder how the "settlement" process works if the writer side loses: I think the Put buyer just buys cheaply the stock and sells it to the writer with profit.
But since the writer has Short Call plus Short Stock then I wonder what transactions are done...

If the put writer has short calls, he/she will just get all of the premiums from selling the calls, nothing happens. And then once and if he/she got assigned on the short put, it will just close the short stock position since he/she's bought the stock upon assignment.

Sorry, I mistyped. It of course should be:
"But since in the Covered Put case the writer has Short Put plus Short Stock then I wonder what transactions are done at assignment, ie. when the Put writer loses."

Edit/Update: it looks like you already described this case in your this posting https://www.elitetrader.com/et/threads/naked-put-definition-wrong-at-wikipedia.362439/#post-5479482
I'm still studying it; thx a lot. Sometimes confusing this options stuff

 

[thecoder]

Summary of the definitions:

Covered Call (risk is fully covered in advance):
Write Call AND Long Stock

Covered Put (risk is fully covered in advance):
Write Put AND Short Stock

Cash Covered Put (risk is fully covered in advance):
Write Put AND Enough cash for Strike required

Naked Call (risk is not covered in advance, must be paid extra if option loses at end):
Write Call (a Long Stock additionally is not required as it then would be Covered Call)

Naked Put (risk is not covered in advance, must be paid extra if option loses at end):
Write Put (a Short Stock additionally is not required as it then would be Covered Put)

PS: "Write" with options means of course "Shorting", ie. ShortSelling
.

 

[Raheel Shaikh]

Well explained JSOP