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Naked Call

  • Sell a call without owning the underlying stock
  • Limited profit potential, unlimited loss potential
  • If looking to profit from just a few point drop in stock, consider selling deep in the money calls. Profit will be close to 1 to 1 for drop. Profit will be similar to a short sale, except has lower margin requirements
  • Far out of the money calls offer lower premium but higher probability of success