A put option which confers on the holder the right to buy the underlying stock at a price below the current market value. When the stock price falls to a certain level, the put buyer can purchase the stock by a specific date before expiry. This put gives the holder the chance to purchase the underlying just not at its current price. The holder, therefore, would wait till a lower price is reached.

The option holder has to have the money needed to purchase the underlying always available in his account as its price can decline to the specified level any time before the put expires. The naked put is also referred to as a cash-secured put or an uncovered put.