he holding of an option only is called a naked position.  That is, if you buy a call option and nothing else, you have a naked call.

There are four naked positions:  buying a call, writing a call, buying a put, and writing a  put.

The values from the four possible naked positions are shown in Figures 8.1-8.4.  In each graph, value is defined as the terminal payoff less the cost of the option.

Figure 8.1

Buy Naked Call Option

Figure 8.2

Buy Naked Put Option

Figure 8.3

Write Naked Call Option

Figure 8.4

Write Naked Put Option

In the next topic, we discuss Covered Positions.