  1: The Naked Call Strategy Strategy: Naked call Opening the Trade: "Sell to open" a call option Closing the Trade: 1. "Buy to close" a call option with the same strike and expiration 2. Let it expire worthless 3. The call is exercised by the buyer, and you must deliver the stock Summary: This is equivalent to a covered put (based on the risks and rewards), except you are not short the underlying stock. You think the stock price will decline moderately, so you sell a call option against it. You are hoping the option price will decline, so you can buy it back. Or the option will expire worthless. Caution! Employ this strategy only if you are bearish on the underlying stock, and you can afford to deliver the shares of the company should the stock take off. Most brokerages don't allow this type of trade (for a good reason). Watch this trade carefully to avoid runaway losses. Better yet, avoid this strategy unless you have Bill Gates' net worth. Maximum Profit: The premium received. Maximum Loss: Unlimited, if the stock rises by a dramatic amount. Breakeven: You lose money on this trade if the stock price is above the strike price plus the premium received on expiration day.  Figure 1: Sell 1 NOV 60 CALL on XYZ Example:
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