Options strategies - call spreads

[Grieve]

I don't think most brokerages would let you write a naked call without marginable securities to cover it. It's basically the same principle as shorting - if the stock you are shorting shoots up, you'll get a margin call from the broker...the classic cause of short squeezes.

Selling a call is really the same as selling short, except you are saying that the stock will not go up, rather than it will explicitly go down. So...if you sold $10,000 of $30 calls for Intel, the broker would have a similar calculation of how much cash and/or marginable securities you'd need in your account to cover it. If Intel starting rising in value, and so the amount that you would have to pay to cover the calls rose, the broker would force you to liquidate some stocks to raise enough cash to buy back the calls. In fact I think the broker can sell them without even asking you.

Now...if that happened for a company that got bought out (say), and shot up 40% after hours before you could do anything...I'm not sure what happens. I assume the brokerage would sue you for the difference, and try to take any assets you had. Brokerages usually have pretty strict margin rules - I doubt they'd even let you sell a naked call unless you had a lot of assets or cash in your account.