Short Call options strategy
A short (naked) call collects premium by selling a call option, profiting when the underlying stays below the strike. Uncovered short calls carry theoretically unlimited risk.
How the short call is built
Sell 1 call option at a chosen strike. Example: sell the 200 call for a premium of 8.
Profit and loss at expiration
The expiration payoff is calculated as: Profit = premium − max(S − K, 0).
- Maximum profit
- Limited to the premium received.
- Maximum loss
- Theoretically unlimited if uncovered — losses grow as the underlying rises above the breakeven.
- Breakeven
- Strike + premium. In the example, 208.
Worked example
Selling the 200 call for 8, at an expiration price of 190 the call expires worthless and you keep the full $8 per share ($800 per contract).
When to use it
Use it when you expect the underlying to stay flat or fall and want to collect premium. Most traders sell calls covered (against owned stock) to remove the unlimited-risk profile.
Managing the risk
An uncovered short call is one of the highest-risk positions in options. Consider a covered call or a call spread to define the maximum loss.
Frequently asked questions
Why is a naked short call risky?
Because the underlying can rise without limit, the potential loss is theoretically unlimited.
What is a covered call?
A short call sold against 100 shares you own, which caps upside but removes the unlimited-loss risk.
Model this strategy
Open the free OptCurve calculator to plot the short call payoff, mark breakevens, and overlay it with other strategies.
Open the P&L calculator