The uncovered call write is a risky options trading strategy where the options trader sells calls against stock which he does not own. Also known as naked call writing.
To learn more about this strategy, see Naked Call Writing.
Before expiration and assignment
The diagrams and worked outcomes describe expiration payoffs, not an option’s market price before expiration. Time decay, implied volatility, rates, dividends and bid-ask spreads affect early closing values. American-style short options can be assigned early; a protective long option is not automatically exercised when a short leg is assigned. Closing or exercising one leg can change the remaining position’s risk.
Payoff summary
Maximum profit: The premium received.
Maximum loss: Unlimited as the stock price rises.
Breakeven
Strike price plus the premium received.
Amounts are per share before fees. Multiply by the shares covered by the position; standard equity options usually cover 100 shares per contract. If a maximum profit or loss calculation gives a negative amount, use zero. These figures assume matching contracts held to expiration and do not include financing or early assignment.
