One of the most popular and basic option strategies in which an inherently bearish investor attempts to capitalize on the potential downward movement of an underlying by taking a short position in call options. Writing a call option obligates the investor to sell the underlying at the preset strike price any time until expiration. Put another way, a call is short when it is written or sold to another investor.
The maximum gain from a short call is only limited to the premium received by the seller. However, potential losses would be unlimited when the underlying follows an upward path. In general, there are two basic types of short calls: covered calls and naked calls.
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