Uncovered Options Trading System

Options Autotrading

Selling Short Calls.


Selling (also called "writing") call options means giving someone else (i.e., the option holder) the right to purchase an underlying stock or index at a given strike price. Option sellers have obligations, but they are rewarded with option premiums which they receive for the sale of the call options. If the options sold expire worthless, the option seller will have no further obligations and will profit from the premiums received.

Traders that sell call options believe the underlying stock or index will decline:

In flat to falling markets, written calls (short calls) can provide a trader with extra income. A call seller may keep the premiums received from the sale of the options. If at expiry, the price of the underlying security is below the option's strike price (i.e., the calls expire worthless), then the option seller has no further obligations.

Covered and Uncovered Calls:

A covered call is the sale of a call against stock already owned. The seller is rewarded with the premiums received from the sale of the calls. Option sellers have obligations: If at expiration, the option buyer chooses to exercise the option, the option seller may lose his or her stock (on which calls were written). If assigned, the option seller must deliver the stock to the option buyer at the strike price.

Even if you do not own an underlying security, you may still be able to sell calls and collect premiums. The option seller has an obligations: If the call buyer chooses to exercise the option, the option seller will have to buy the underlying at its current market price and then deliver it to the buyer - the option seller will however receive only the amount stated by the strike price. If the underlying security has gone up significantly since the option seller sold calls on it, the option seller could lose a considerable amount because the option seller will only receive the amount dictated by the strike price. This is why selling naked (uncovered) calls is the most aggressive and risky strategy an investor can use.

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DISCLAIMER: THIS INFORMATION IS INTENDED FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE ANY FINANCIAL ADVICE. RISK IS INVOLVED IN ALL STYLES OF MONEY MANAGEMENT. Uncovered options trading involves greater risk than stock trading. You absolutely must make your own decisions before acting on any information obtained from this Website.

The return results represented on the web site are based on the premium received for the selling options short and do not reflect margin. It is recommended to contact your broker about margin requirements on uncovered options trading before using any information on this web site. Use our "Trade Calculator" to recalculate our past performance in relation to the margin requirements, brokerage commissions and other trading related expenses. Past performance is not indicative of future results.

Risk Statement:

Naked options trading is very risky - many people lose money trading them. It is recommended contacting your broker or investment professional to find out about trading risk and margin requirements before getting involved into trading uncovered options.

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