An option sold by someone who does not own the underlying asset (for call options) or does not have cash set aside (for put options). This exposes the seller to potentially unlimited losses if the option is exercised and the asset price moves sharply against them.
You sell a call option on Apple stock that gives someone the right to buy 100 shares at $150 per share, but you don't own any Apple shares. If Apple's stock price jumps to $200, you must buy the shares at $200 to deliver them, losing $50 per share, or $5,000 total.
Greater Fool is a free Chrome extension that explains terms like this in place. Highlight a word on any page, click Explain, keep reading.
Add to Chrome (free)