Topic summary
Naked put
Extracted from the Wikipedia article Naked option.
Naked put example
Shares of XYZ is currently selling at $85 per share and Speculator A decides to sell a put option at a strike price of $75 per share on or before June 10 for $24. If the XYZ shares fail to drop below $75 before June 10, the put option expires worthless and Speculator A makes a profit of $24. However, if the XYZ shares drop at or below $75, Speculator A would be obligated to buy 100 shares of XYZ at a price of $75, even if the market price drops at or near $0.