how does a covered call differ from a naked call 
a covered call strategy involves selling call options while simultaneously owning an equal number of shares in the underlying asset this approach is considered safer than selling naked calls because the potential losses are offset by gains in the owned shares if the stock price rises 5 the primary goal of a covered call is to generate income through the premiums received with the security of owning the underlying asset to cover the obligation if the option is exercised can anyone sell naked calls no only those approved by their broker can typically sell naked calls understanding the high risks involved the financial industry has erected specific measures to protect themselves and investors 3 brokerages often impose higher margin requirements and proof of significant trading experience before allowing an investor to sell naked calls these barriers are in place to ensure that only those with a deep understanding of market dynamics and the capacity to absorb potential losses venture into this high risk territory the bottom linea naked or uncovered call is when you sell a call option without owning the underlying security or some equivalent the seller writer of the call gets immediate premium income from the option s buyer and will collect the full amount if the option expires out of the money however if the underlying rises above the strike price there s the potential for unlimited losses this makes it a very high risk strategy suitable only for certain investors or traders 