Naked Calls

A form of option writing in which the investor sells a call against securities he doesn't own. This is one of the riskiest of market transactions, because the writer's risk is unlimited. If you do own the security, then you've written a ""covered call.""

If you sold a naked call and the option owner exercised his right to buy the stock, you would be obligated to acquire the called shares in the open market at whatever price it was trading at. There is no limit to how high this price could go.



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