Watch that lout hiding a good-for-nothing! (7)
I believe the answer is:
lookout
'watch' is the definition.
('lookout' can be a synonym of 'watch')
'lout hiding a good-for-nothing' is the wordplay.
'hiding' is an insertion indicator.
'a good' becomes 'ok'.
'for' means one lot of letters go next to another (I've seen this in other clues).
'nothing' becomes 'o' (looks like zero - 0).
'ok' after 'o' is 'ook'.
'lout' placed around 'ook' is 'LOOKOUT'.
'that' is the link.
(Other definitions for lookout that I've seen before include "Guard on duty" , "Observatory" , "Watching person" , "Person set to watch" , "One who keeps watch, a sentry" .)