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Naked Position

Source: Investopedia
This Article has been Edited for Accessibility

Naked Position

What is 'Naked Position'

A securities position that is not hedged from market risk. Both the potential gain and the potential risk are greater when a position is naked instead of covered (a covered position is hedged from market risk).

Explaining 'Naked Position'

If an investor simply holds 500 shares of Ford, he or she has a naked position in Ford. If the investor wanted to cover this position, he or she could buy put option contracts, which would help protect against downward movements in the price of Ford shares.


Additional Resources

  1. The Economics Of Ipo Stabilisation, Syndicates And Naked Shorts ... [academia.edu]
  2. Short Selling In Initial Public Offerings [cbe.lehigh.edu]
  3. Credit Default Swaps And The Credit Crisis [math.illinoisstate.edu]
  4. Department Of Economics [umass.edu]
  5. The Naked Truth: Appearance Discrimination, Employment, And The Law [scholarship.law.berkeley.edu]
  6. Essays In Financial Economics: Currency Risk And Pricing Kernal ... [repository.cmu.edu]