Naked Call

In the realm of options trading, an uncovered call, often referred to as a naked call, is a strategy employed by investors to sell a call option without possessing the underlying asset. Unlike a covered call that necessitates collateral in the form of the underlying asset, a naked call involves selling the right to something the investor does not currently hold. This strategy carries higher risks as the investor must be prepared to purchase the underlying asset at the agreed-upon price if the counterparty chooses to exercise the option. It is crucial for investors to have sufficient funds available to fulfill their obligation, making naked call trading a potentially risky endeavor.