Bullish Patterns
Long Calls
Bull Call Spread
Bull Put Spread
Call Backspread
Long Call Ratio Spread
Naked Put
Synthetic Long Stock
The Collar
Covered Calls
Synthetic Long Call
Synthetic Short Put
Covered Straddle
Covered Strangle
Married Put
Protective Put

Bearish Patterns
Long Puts
Bear Put Spread
Bear Call Spread
Put Backspread
Long Put Ratio Spread
Naked Calls
Synthetic Short Stock
Synthetic Short Stock (split strikes)
Covered Put
Protective Call
Synthetic Short Call
Synthetic Long Put

Long Volatility
Long Straddle
Long Strangle
Short Call Butterfly
Short Put Butterfly
Short Iron Butterfly
Short Call Condor
Short Put Condor
Short Iron Condor
Long Guts
Short Call Ladder
Short Put Ladder
Long Call Synthetic Straddle
Long Put Synthetic Straddle

Short Volatility
Short Straddle
Short Strangle
Long Call Butterfly
Long Put Butterfly
Long Iron Butterfly
Long Call Condor
Long Put Condor
Long Iron Condor
Short Guts
Long Call Ladder
Long Put Ladder
Call Ratio Spread
Short Call Ratio Spread
Put Ratio Spread
Short Put Ratio Spread
Ratio Call Write
Ratio Put Write
Short Call Synthetic Straddle
Short Put Synthetic Straddle
Variable Ratio Write

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Naked Calls

Risk: high
Reward: limited

General Description
Entering a naked call entails selling calls.

(draw a naked call risk diagram here)

The Thinking
You're moderately bearish on a stock and are very confident the upside is limited. Instead of buying puts, which requires a net debit and some downside movement just to get to breakeven, you sell calls, which results in a net credit. Being a seller means time decay works in your favor, so even if the stock doesn't move, you'll profit.

XYZ is at $44, and you believe the upside is very limited and the stock will either hold its current level or drop in the coming weeks. You sell (10) 45 calls for $2.50.

Below $45, the calls expire worthless, and you keep the entire premium collected.

Your breakeven is at $47.50 ($45 strike + $2.50 premium).

Above $47.50, you’ll lose money point-for-point with the underlying. For example, if XYZ moves to $55, the calls, which you sold for $2.50, will be worth $10.00, so you'll have a $7.50 loss per contract. A brokerage firm should not approve you for naked calls unless you have significant experience and a big trading account.

The PL chart below graphically shows where this trade will be profitable and at a loss.