The potential loss for a writer of a naked call option on a stock is
A)limited.
B)unlimited.
C)larger the lower the stock price.
D)equal to the call premium.
E)none of the above.

Question

The potential loss for a writer of a naked call option on a stock is
A)limited.
B)unlimited.
C)larger the lower the stock price.
D)equal to the call premium.
E)none of the above.

Quizplus · Accepted Answer

The potential loss for a writer of a naked call option on a stock is unlimited because the writer is obligated to sell the underlying asset at the exercise price, regardless of how high the stock price may rise. This means that the writer's loss increases as the stock price rises beyond the exercise price of the option.

The Potential Loss for a Writer of a Naked Call