134 
TABLE 5-1. 
Position at July expiration. 
XYZ Price at Call Price at 
Expiration Expiration 
30 0 
40 0 
50 0 
55 5 
60 10 
70 20 
80 30 
FIGURE 5-1. 
Uncovered (naked) call write. 
+$500 
C 
0 
~ ·15.. 
X 
w 
cu 
(/J 
~ ...I 
0 
lt, 
.... ...... 
", Naked Write 
45 SO', 
.... .. .... .. .. Short Sale ,, 
.. .. 
Stock Price at Expiration 
.. 
Part II: Call Option Strategies 
Profit on 
Naked Write 
+$ 500 
+ 500 
+ 500 
0 
500 
- 1,500 
- 2,500 
.. .... .. 
~ 
Moreover, the short seller pays out the dividends on the underlying stock, whereas 
the naked call writer does not. The naked call will expire, of course, but the short sale 
does not. This is a situation in which the naked write outperforms the short sale. 
However, ifXYZ were to fall sharply- to 20, say- the naked writer could only make 
5 points while the short seller would make 30 points. The dashed line in Figure 5-1 
shows how the short sale of XYZ at 50 would compare with the naked write of the 
July 50 call. Notice that the two strategies are equal at 45 at expiration; they both