[coolgeek]

It is in fact how naked puts work

http://en.wikipedia.org/wiki/Naked_put

[eru]

Aren't you talking about naked calls (http://en.wikipedia.org/wiki/Naked_call)?

[coolgeek]

Them too. Both involve "selling something you don't own" (the underlying security), a point disputed in the post I was replying to.

[eru]

I don't see how writing naked puts involves selling. They involve buying, only.

[Snurre]

All buying involve the counterpart selling. How can you buy something that isn't sold?

[eru]

Oh, but in naked puts the seller of the underlying assets (i.e. the buyer of the put) calls the shots. If they don't want to sell, they don't have to sell. And the writer of the put only ever has to put up at most the strike price of the put.

So no unlimited risks there.