| Naked call yields assume an out-of-the-money option is sold in a margin account and the net investment is an initial margin amount equal to 30% of the stock price minus the out-of-the-money amount, or 10% of the stock price, whichever is greater. In the real world this margin will increase if the stock goes up. The unchanged yield is equal to the income divided by the net investment. The income is the premium received for out-of-the money calls, or the amount above and beyond the in-the-money amount for in-the-money calls. The risk of loss is unlimited because the stock price could keep going up. |
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