Short Call

A short call position is created by selling (writing) a call option, collecting premium upfront in exchange for the obligation to sell the underlying asset at the strike price if the buyer exercises. When covered (owning the underlying shares), it is called a covered call and has limited risk. When naked (without owning shares), the risk is theoretically unlimited because the stock can rise indefinitely. Short calls profit when the stock stays below the strike price, allowing the option to expire worthless and the seller to keep the full premium. The strategy benefits from time decay (positive theta) and declining implied volatility. Short calls are used in covered call writing, spread strategies (vertical spreads, iron condors), and as part of more complex multi-leg positions. Maximum profit is always limited to the premium received.