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.