Short Call Options aka Naked Call
| B/S | Strike | Type | Price |
|---|---|---|---|
| Sell 1 | $45 | Call | $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
Gamma
Vega
Theta
98 Comments
Dinesh September 22nd, 2010 at 8:17am
This is an excellent site. I never seen a site like this which provides indepth financial data about options. My humble Thanks to the creaters of this site.
Peter February 14th, 2010 at 5:59am
Hi Ade, short calls are bearish strategies so you use them when you expect stock prices to fall. A short put is the opposite - you would sell a put if you expect the market to rise.
ade February 10th, 2010 at 1:22am
When do you use Short put and Short call?
why do ppl use it when it is not profitable?
can you show me if this is profitable?
sorry if you have mentioned but I overlooked.
raman January 31st, 2010 at 10:25am
Best stratergy to cover your stock.
Peter January 15th, 2010 at 2:43am
Nope, they're the complete opposite. A naked call option loses value as the market rises and a naked put loses value as the market falls. Both have a limited profit potential of the premium received when selling the option though. See this graph for a naked put
https://www.optiontradingtips.com/strategies/short-put-option.html
Andy January 14th, 2010 at 8:32pm
Peter, is a naked call the same as a naked put?
Peter July 10th, 2009 at 6:24am
Hi JD, you could buy the underlying stock as a hedge, which would make your position a "covered call".
JD July 9th, 2009 at 9:23am
If I have a naked call OTM...how can I hedge my risk of loss, or is the unlimited risk just that...unlimited
Peter May 6th, 2009 at 6:15pm
Hi George,
Yes, the amount of shares remains constant, however, as the price continues to rise your losses magnify. If you are exercised, you will have to sell the shares to the option buyer at the strike price, not the current market price. So the further away from the strike price the stock is trading at, the greater your losses become.
George May 6th, 2009 at 1:46pm
Hi, I can see how in a short call you are limited in profit because the buyer will not exercise and your profits are the premium. But if the market rises aren't you as a selling just limited to the amount of stock you must sell to the buyer as your loss? For example if I initially own 100 shares @ 10 that I purchased, and if i sell an option and they exercise the option on me dont I just loose 1000?
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