👉 A securities weapon, also known as a naked short or naked call, is a derivative contract that allows the holder to immediately sell an underlying security without having any assets or collateral backing it. This means that the holder can exploit market volatility to profit from a potential price decline by shorting the security outright, but they are not obligated to do so if the market moves in their favor. The term "weapon" comes from the idea that this position can be used aggressively to take advantage of market movements, potentially causing significant losses for other market participants if the security's price rises instead. Securities weapons are often used in speculative trading and can contribute to market instability if not properly regulated.
