What is a Naked Call?
Updated 3 September 2026 · by Theo Chen
A Naked Call sells the right to buy your stock at a fixed price — without owning the stock, and without any other option capping what happens if it rallies. The premium is fixed the day you sell it. The loss is not.
Unlimited risk
There is no maximum loss on a Naked Call. A stock can keep rising, and every dollar above your breakeven costs you a dollar with no floor to catch it. Want the same bet with a defined, known worst case? A Bear Call Spread buys exactly that.
A Naked Call is one leg of a Short Strangle — set the put side to $0 in the Short Strangle Calculator and you're pricing a single Naked Call, with the same undefined-risk warning built in.
Open the Short Strangle Calculator →How is a Naked Call built?
One leg, no protection: sell a Call above the current price. No shares underneath it — that would make it a Covered Call — and no further-out long Call above it — that would make it a Bear Call Spread. Just the short Call, alone.
The payoff: fixed profit, unlimited loss
- Max profit = the premium collected, kept in full if the stock finishes below your strike.
- Breakeven = strike plus premium.
- Max loss = unlimited above the breakeven — it does not stop at any price.
A worked example
A stock trades at $100. With 45 days left you sell the $105 Call for $1.80 — a $180 credit.
- Net credit / max profit: $1.80 × 100 = $180, kept if the stock stays below $105.
- Breakeven: $105 + $1.80 = $106.80.
- Max loss: unlimited above $106.80 — at $130 the loss is already $2,320, more than 12× the credit you collected, and there is no strike where it stops.
Sell the $105 Call for $1.80 (red). Max profit $180 below $105; the loss opens up above the $106.80 breakeven with no ceiling — it does not flatten at any price.
Naked Call vs Covered Call — the ceiling that's missing
A Covered Call sells the identical Call against 100 shares you already own. Above the strike, the shares you own rise in lockstep with the loss on the Call — the two cancel out, dollar for dollar, and you simply get called away at a locked-in price. A Naked Call sells the same option with no shares to offset it. Above the strike, there is only the loss, with no cancelling gain sitting underneath it.
When it's worth the risk (if ever)
Rarely, and only on a liquid, neutral-to-bearish name with rich implied volatility and no upside catalyst — no earnings, no buyout chatter, no squeeze setup — in an account with the approval, margin and discipline to manage it actively. Avoid anything that could be acquired, squeezed or gapped up. If that sounds like more than you want to babysit, a Bear Call Spread keeps most of the credit and puts a hard ceiling on the loss.
The bottom line
A naked call is the one strategy on this site with genuinely unlimited loss - the premium you collect is fixed the moment you sell it, but the loss above your breakeven has no ceiling, so a single runaway rally can cost many times more than every quiet month of premium you've ever collected.
Frequently asked questions
What is a Naked Call in simple terms?
A Naked Call is a short Call with no stock, and no other option, underneath it to cap the loss. You collect the premium up front, and if the stock stays below your strike you keep it — but if the stock rallies past your breakeven, the loss grows a dollar for every dollar the stock keeps climbing, with nothing that stops it. It is the one common options strategy on this site with genuinely unlimited risk.
Why is the loss on a Naked Call unlimited?
Because a Call's value has no ceiling — a stock can, in theory, keep rising forever, and every dollar above your strike is a dollar you owe the option's Buyer at expiration. A Covered Call caps that same short Call at the value of shares you already own; a Naked Call has no shares, so nothing offsets the loss. A takeover rumor, a short squeeze or a surprise earnings beat can gap a stock 20-50% overnight, straight through a strike that looked safe the day before.
What is the maximum profit on a Naked Call?
The premium you collected, and nothing more — capped the moment you sell it. That asymmetry is the whole problem: a fixed, modest gain against a loss with no ceiling. Selling a Naked Call is betting that the small, certain premium is worth the small, hopefully-rare chance of an uncapped loss — a bet that looks fine for a long run of quiet months and can erase years of them in one bad week.
How much margin does a Naked Call require?
More than most retail accounts expect, and it rises automatically as the stock rallies against you — because the position's theoretical risk is unlimited, your broker's formula keeps demanding more collateral the closer the stock gets to (and through) your strike. Most brokers require the highest options-approval tier to sell one at all, and can force-close the position if your account can't meet a margin call in time.
Is a Naked Call ever worth the risk?
Rarely, and only with real conviction the stock will not run — a liquid name, high implied volatility, no earnings or acquisition chatter, in an account with the approval, margin and discipline to manage it actively. Most sellers who want that premium reach for a Bear Call Spread instead: buy a further-out Call, cap the loss, keep most of the credit, and never have to answer a margin call at 2am.
Related questions
- What is a naked put, the finite-loss sibling?
- What is a covered call, the same short call with a ceiling underneath it?
- What is a call spread, the defined-risk alternative?
- What is a short strangle, which pairs a naked call with a naked put?
Related tools and guides
Price the identical short call, with the undefined-risk warning built in, on the Short Strangle Calculator. Cap the loss instead with the Call Spread Calculator, sell the covered version on stock you own with the Covered Call Calculator, or map any structure in the Payoff Diagram Builder.
Educational explainer only — not financial advice. Examples are illustrative and exclude commissions, early assignment and dividends. Confirm the mechanics and size positions to your own risk tolerance.