Unlike a covered call writer, a naked call writer will always lose if:
A)the stock price rises above the strike price, plus the speculative premium.
B)the stock price declines.
C)a closing transaction is executed.
D)None of the above

Question

Unlike a covered call writer, a naked call writer will always lose if:
A)the stock price rises above the strike price, plus the speculative premium.
B)the stock price declines.
C)a closing transaction is executed.
D)None of the above

Quizplus · Accepted Answer

Writers of call options take the opposite side of the market from buyers. The writer is similar to a short seller in that he or she expects the stock to decline or stay the same. For short sellers to profit, prices must decline, but because writers of call options receive a premium, they can make a profit if prices stay the same or even rise less than the speculative premium.

Unlike a Covered Call Writer, a Naked Call Writer Will