Naked Call

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Naked Call

An investment strategy in which one sells a call without owning the underlying asset to hedge the risk. Unlike more complex spreads and straddles, which involve the purchase or sale of multiple options in order to profit in different ways, naked calls are straightforward calls. An investor using a naked call strategy makes a profit or loss depending on the movement of the underlying asset. The risk to a naked call is that the option will be exercised, requiring the seller to buy the underlying asset at the market price and then immediately sell it (usually at a loss) to fulfill the terms of the call. Naked calls are also called uncovered calls. See also: Covered Options. Naked Put.
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The Sunday Times said an investigation it carried out into online abuse had uncovered calls to ban Islam, deport Muslims and "vile" attacks on London mayor Sadiq Khan.
* Refrain from writing puts or uncovered calls. In exchange for upfront premiums, the seller of a put option must purchase a stock at a specified price, and the seller of a call option is obligated to sell a stock at a specified price.
Writing uncovered calls can be profitable during periods of declining or stable prices, but investors should be aware of the significant risks involved.