A naked call, or short call, option is sold ...A naked call option carries unlimited risk for the seller. The option seller collects premium when the option is sold and in return gains the obligation to sell shares (which the option seller does not already own) of the underlying stock for the option strike price. In all cases, the seller keeps the premium. However, the option seller may be forced to first purchase shares of the underlying and then sell them for the expiration price if the option purchaser chooses to exercise the option. This strategy is bearish as the option seller profits when the price of the underlying security is below the strike price.

If the price of the underlying security is below or equal to the strike price of the option at expiration, then the option seller keeps the premium generated by selling the option and cannot lose any money if the option is exercised.

If the price of the underying security is above the strike price of the option at expiration, then the option is automatically exercised in most cases. The option seller is obligated to purchase shares of the underlying at thr market price and sell them at the strike price of the option.