Short Call Options aka Naked Call

Short (naked) Call Option Payoff Graph

B/SStrikeTypePrice
Sell 1$45Call$1.29
Net Credit($129)

A short call is simply the sale of one call option. Many refer to short positions as being "naked" the option. Selling options is also known as "writing" an option.

The Max Loss is unlimited as the market rises.

The Max Gain is limited to the premium received for selling the option.

Characteristics

When to use: When you are bearish on market direction and also bearish on market volatility.

A short is also known as a Naked Call. Naked calls are considered very risky positions because your risk is unlimited.

Short Call Option Greeks

Delta

Short Call Option Delta Graph - 30 Days to ExpirationShort Call Option Delta Graph - 3 Days to Expiration

Gamma

Short Call Option Gamma Graph - 30 Days to ExpirationShort Call Option Gamma Graph - 3 Days to Expiration

Vega

Short Call Option Vega Graph - 30 Days to ExpirationShort Call Option Vega Graph - 3 Days to Expiration

Theta

Short Call Option Theta Graph - 30 Days to ExpirationShort Call Option Theta Graph - 3 Days to Expiration

98 Comments

Peter September 28th, 2016 at 6:39pm

Hi DG,

What is your view of the stock? If you are neutral to bearish on the stock and now have a short stock position you could consider selling put options against it. This would also depend on the volatility and therefore the premium to be received if selling the puts.

You also mention "spread"...was there another leg to this trade? I.e. are you still long some options?

DG September 28th, 2016 at 1:55pm

My option spread was assigned. I am now short, what is the next best move? I know I need to buy to call but at what price? Higher or lower than the price I was assigned? What will be my loss?

Peter April 24th, 2016 at 6:50pm

Nice one! Let us know how it goes.

Just curious...is it a shorter term expiry that you're selling? And if it expires worthless, will you roll it again etc?

Peky April 24th, 2016 at 12:34pm

Hi Peter,

Thanks for your reply.
Yes, that's correct. I have a long term option in the money and want to squeeze some extra cash. :-)

Thanks

Peter April 23rd, 2016 at 10:17pm

Hi Peky,

Yep, you can do that. I take it your long position is making a profit and instead of selling back your existing call you are going to collect some premium from the short sold strike?

Peky April 23rd, 2016 at 12:33pm

Hi,

I have a long call open trade and I'm wondering should I be able to sell a call option on a higher strike price and same expiry so that I turn my long call option into a long call spread?
To clarify, I have level 4 for trading options in my trading account, which allows me to write naked options within my margin limit.

Thanks

Peter March 29th, 2016 at 9:18pm

Hi Omkar,

You can hold any position of an option, long or short, until the expiration. If you are short, however, and the option is in-the-money then you will have the position exercised.

If the option is held over a deliverable asset, such as a stock, then you will be assigned a short position in the stock contract.

If the contract is held on an index, such as the NIFTY, it is likely that the contract is cash settled and you will be traded out of the position for a cash profit/loss.

Does this answer your question?

omkar March 29th, 2016 at 1:13pm

Hi, can anyone tell me, am I able to keep a short sell call till the expiry of contract? I seen in NSE open price is high at the start of day of contract. And price is low at the time of expiry of contract.

Peter February 12th, 2015 at 6:04pm

Hi FM,

A synthetic short call can be constructed by a short stock and short put option.

You can work out other synthetic relationships using the Put Call Parity theorem.

FM February 12th, 2015 at 2:10pm

how can you get a short call from 2 options, e.g synthetically made ?

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