Published On: Mon, Feb 11th, 2013

Naked Call

A Naked Call is an options trading strategy in which the trader sells a Call option without having shares of the underlying stock in his brokerage account.

In this case the Call Option would have a profit if the underlying stock never exceeded the strike price of the option.  The option writer or option seller would earn income from entering into the contract and receiving the premium from the buyer of the call option.  A Naked Call is inherently risky due to the fact that the gain of the stock is limited to the premium from writing the call, while the potential loss is unlimited if the value of the underlying security exceeds the strike price of the call.

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About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.