Negative balance
Definition · Level 4 · Naked options
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Account equity below zero after losses exceed everything in the account; the customer owes the broker the deficit.
Example
Short calls lose $140k in a $100k account → you owe $40k.
Where Tradecraft teaches it
Level 4 · Naked options, in the lesson “Short gamma, gaps and tail risk”: Why losses accelerate, why stops fail on gaps, the steamroller, and margin calls.
Related terms
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- Forced liquidationThe broker closing your positions itself — typically at market prices and without waiting for your deposit — to bring the account back within…
- Gap riskDanger that a price jumps between trades — overnight, over a weekend or on news — skipping your stop and your chance to adjust.
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- Picking up nickels in front of a steamrollerDesk image for strategies that collect small, steady gains while exposed to a rare, crushing loss — the classic critique of naked option selling.
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