Unlimited Risk

Unlimited Risk – refers to an option trade or an option spread that can theoretically lose an unlimited amount of money. Typical example would be any option spread that includes a naked (uncovered) call option. This is considered unlimited because theoritically an underlying price could go to infinity, however in practice that has never happened (yet?) so the actual risk is “a very large amount of money, possibly more than you have in your account” (ie bankruptcy).

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