Learn how a naked call works, why the premium is limited, and why the strategy carries theoretically unlimited loss risk.
A naked call options strategy involves selling a call option without owning the underlying asset.
That means the seller keeps the premium upfront but remains exposed if the underlying price rises sharply.
If the option expires out of the money, the seller keeps the premium as profit. But if the underlying rallies above the strike, the seller may have to deliver the asset or close the position at a loss. Because the underlying price can, in theory, rise without a hard cap, the naked call has potentially unlimited downside.
This matters because naked call writing is one of the clearest examples of collecting limited income while taking open-ended risk. Broker margin rules and risk controls are therefore a major part of using the strategy at all.