What is selling a naked call? Is it risky?

Yes, selling a naked call is considered a very risky option strategy. This is because it exposes the seller (you, in this case) to potentially unlimited losses if the underlying stock price rises significantly. That's why the ITM course primarily focuses on coaching you on selling credit spreads so your potential trading losses for each trade are capped.


Example: Let's say a stock is trading at $20, but you don't believe it will climb in price higher than $35. You decide to sell a naked $35 call option. Then, let's say that the option’s underlying stock climbs to $50, and the option holder (the person who bought your options contract) then exercises the option. That means you would then have to buy 100 shares of the stock at $50, shares that you had already effectively sold for $35 a share. That's just one example of a loss, but as you can see, your loss in that example could have been much more severe.