Short Call

A single sold call: the credit received is the most that can be gained, and the loss grows without a cap as the underlying rises.

Also called Naked call, Written call

Outlook

Bearish

Family

Basic

Level

Expert

Legs

1 leg

Expirations

1 expiration

Opens for

Credit

Maximum profit

Limited

Maximum loss

Unlimited

Legs at the reference strikes this page's diagrams are drawn from

Leg	Side	Contract	Ratio	How the strike is chosen
A	Short	Call 105	1	Delta 30

What it is

One call option sold, with no shares held against it. The seller receives the premium and takes on the obligation to deliver 100 shares at strike A if assigned.

⛔ The loss is genuinely unbounded. Every other structure on this page has an arithmetic floor or ceiling; this one does not. An underlying can keep rising, and the obligation to deliver at A rises with it, without limit. That single fact is why an uncovered short call is treated differently by every broker’s margin system from every other position here.

Holding 100 shares against it makes it a covered call, which is a different structure with a different risk profile — the shares supply what the obligation requires, so the unbounded loss becomes a capped gain instead.

The payoff

At expiration

At expiration the position keeps the full credit at every price below strike A, then falls in a straight line above it with no lower limit.

Flat and positive below A — the credit — and falling one for one above it, forever. Break-even is the strike plus the credit received.

How it behaves before expiration

Today, before expiration

Today's value is a smooth curve below the expiration line, furthest below it near the strike and converging as expiry approaches.

The dashed curve sits below the expiration line by the time value still outstanding. The seller realises the full credit only when that has decayed.

The Greeks

Delta is negative, between −1 and 0: the position loses as the underlying rises.

Gamma is negative and largest near the strike. Losses accelerate; gains decelerate.

Theta is positive — the income of the position.

Vega is negative. Rising implied volatility raises the price of the option that has been sold.

Where it lives in the volatility environment

A short call is a short volatility position. Practitioners generally note that equity index call premiums are lower relative to puts at the same distance — the skew — so a call sold at a given delta collects less than a put sold at the same delta, while carrying the unbounded side of the distribution.

Descriptive.

What can go wrong

• Unbounded loss. Repeated because it is the only structure here with the property, and because a chart truncated at the right edge hides it.
• Assignment before a dividend. A deep in-the-money short call is at its highest risk of early assignment the day before the ex-dividend date, when exercising to capture the dividend becomes worthwhile for the holder.
• A short squeeze or a takeover moves an underlying by an amount no recent history suggested, and the position is on the wrong side of it.
• Margin, not just loss. The requirement grows as the position moves against the seller, and it can force a close at the worst moment rather than at a chosen one.

Building it in Option Panel

Open Build Strategy and pick Short Call. The builder seeds one short call and resolves the strike by delta, percentage or points from the price, offset, exact strike or target premium.

Option Panel does not send orders to a broker from this panel: the legs are staged on the trade and the existing order ticket is where an order is placed. Your broker executes the order.

Back to the encyclopaedia · What-if analysis in the docs

Related strategies

• Bear Call Spread — the same view with a long call above it, which bounds the loss.
• Long Put — the other bearish primitive, with the risk paid up front instead of open-ended.
• Short Put — the mirror image.