What Is the Difference between a ‘Covered Call’ and a ‘Naked Call’ Strategy?

A covered call is a conservative strategy where an investor sells a call option against an equal amount of the underlying asset they already own. The asset 'covers' the obligation, limiting the risk to the opportunity cost of the asset's potential appreciation.

A naked call, conversely, is selling a call option without owning the underlying asset. This is a high-risk, speculative strategy because the potential loss is theoretically unlimited if the underlying asset's price rises indefinitely.