Any type of option contract in which the contracting party does not own the underlying asset at the time of delivery (a situation in which a trader sells an option contract without holding a position in the underlying asset as protection from an adverse shift in price). Such options entail the risk of an unforeseeable loss. As a rule, brokers will therefore only accept such orders from business partners whose loss absorption capacity is beyond doubt (generally brokers do not allow inexperienced business partners to place this type of order). – See contingent loss, short sale, long position; open interest, position, uncovered, short selling, position, covered.
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