Naked Call

A naked call is a strategy where a trader sells a call option without owning the underlying asset. If the price of the asset rises significantly, the seller is obligated to provide the asset at the strike price, which they must then purchase at the higher market price.

This results in a loss that can be theoretically infinite as the asset price has no upper bound. It is an extremely high-risk strategy that requires strict discipline and deep capital reserves.

Many exchanges restrict naked call selling to only the most qualified accounts. It is essentially a bet that the asset price will not exceed the strike price, often used by income-focused traders in stable or bearish market environments.