Chapter 12: Strategies for selling naked call options
Selling naked call options, or uncovered calls, is a strategy whereby you sell call options but do not own the underlying stock. This is a high risk strategy as your losses are potentially unlimited. Because of the high risk profile of selling naked call options, this strategy is only recommended for traders who have enough experience and skill in the market to manage such a position.
In this chapter we will discuss the advantages and disadvantages of selling naked call options and some of the strategies that can be used.
Selling naked call options
When selling a naked call option, you are granting the right to the buyer to purchase 100 shares of the underlying stock at the strike price. ...