A short call (also called a naked call) is when you sell a call option without owning the underlying stock. You collect the premium upfront but face unlimited risk.
Tesla at $200:
Maximum Profit: Premium collected ($500)
Maximum Loss: Unlimited (stock can rise forever)
Breakeven: Strike + premium collected
The unlimited risk makes naked short calls dangerous. If Tesla shoots to $500, you're forced to deliver shares you don't own at $200, locking in a massive loss.
Most traders sell calls against stock they own (covered calls). Risk is capped because if assigned, they deliver the stock they already own.
Professional traders with large accounts and experience sometimes sell naked calls in established downtrends with strong resistance. But most retail traders should avoid it completely.
Brokers require significant margin and experience level to sell naked calls. Most don't allow it for newer traders.
Related: Covered Call, Short Put, Naked Call
