Why Is It Generally Easier for Retail Traders to Write Covered Options than Naked Options?
It is easier for retail traders to write covered options because the strategy has a defined, limited risk profile. The underlying asset they own acts as collateral, eliminating the risk of unlimited loss, which makes the margin requirement minimal or zero.
Exchanges impose strict, high margin requirements and often require a higher level of account approval for naked options due to the inherent, potentially unlimited loss risk, making them inaccessible or too capital-intensive for most retail traders.
