Naked Call

A naked call in crypto refers to the sale of a call option without owning the underlying cryptocurrency. It exposes the seller to unlimited risk because there's no limit to how high the cryptocurrency's price can rise. If the price surpasses the option's strike price, the seller must purchase the cryptocurrency at the higher market price to cover the option's obligation, resulting in a loss. For example, if Alice sells a naked call option for Bitcoin with a strike price of $50,000 and Bitcoin's price rises to $60,000, she must buy Bitcoin at $60,000 to fulfill the option contract, incurring a $10,000 loss per Bitcoin. This strategy can lead to significant losses if not managed properly.