The seller of a naked call option has no investment in the call option. The seller receives money for selling the option. It is the buyer of the option that has an investment in it.
The strike price of an option is its exercise price, or the amount the seller of the option will receive for the sale of the undeerlying stock if the option is exercised. This amount is not the maximum possible loss to the seller of a naked call option.
The amount the seller receives for the sale of a naked call option is usually a fraction of the current market price for the underlying stock. It belongs to the seller and it cannot be lost.
If no other transaction is made to hedge it, the maximum possible loss to the seller of a naked call option is unlimited. A call option is an option to buy a stock. The seller of the call option is giving the buyer of the option the right to buy the stock at a specific price, called the exercise price or strike price, before a certain date. If the buyer of the option decides to exercise the option, the seller (also called the writer) of the option is obligated to sell the stock to the buyer of the option at the exercise price. A naked call option is an option to buy a stock that the seller of the option does not own. If the option is exercised by the buyer of the option, the seller of the option must purchase the stock on the market at the market price in order to have the stock to sell to the buyer of the option at the exercise price. If the option is exercised, the market price will be higher than the exercise price. If it were not, the call option would not have been exercised. Since there is no limit to how high a stock's market price can go, there is no limit to the amount that the seller of the naked call option would have to pay to purchase the stock and thus no limit to the potential loss to the seller of the naked call option.
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