A naked put, also referred to as an uncovered put, is an investment strategy where a trader sells a put option, without owning the underlying security or any offsetting positions. It is designed to generate income for the investor by collecting the option premium but carries a significant amount of risk.

When selling a naked put, the option trader expects the underlying asset to stay above the strike price, at which point the trader keeps the premium as a profit, less any broker commissions. On the other hand, if the underlying asset declines in price, the trader may be forced to buy the stock at the strike price, resulting in a loss. The downside loss potential for the trader is unlimited and could theoretically go as low as zero if the stock declines to zero.

To determine the break-even point for the option trader, one must subtract the price of the option premium from the strike price of the underlying asset. In other words, the seller will lose money if the stock price falls below this break-even point.

While the benefit of selling naked puts is that the trader will receive an initial premium and will profit if the underlying asset stays above the option's strike price, there is also potentially unlimited downside risk. For this reason, a investor considering a naked put should be aware of their risk tolerance and have the financial resources to cover the potential for losses. It is typically recommended that only sophisticated investors with a good understanding of the risks and rewards should consider utilizing this strategy.

In conclusion, the naked put strategy, while potentially profitable, is not suitable for all investors and carries significant risk. Prospective traders should carefully assess their risk tolerance and financial resources before using this strategy.