New York, NY securities attorney Jenice L. Malecki talks about the potential risks associated with trading options. She states that the risks of a covered call strategy primarily involve the potential loss of the underlying stock and the associated consequences, such as tax implications or forfeiting premiums. Investors may also face the disappointment of losing a position they intended to hold long-term.

For those engaging in options beyond covered calls, the risks increase. Writing a “naked” call—selling a call without owning the underlying stock—requires purchasing the stock in a rising market, exposing the investor to theoretically unlimited losses. Similarly, buying puts carries the risk that the investment could decline to zero, resulting in a total loss. In some cases, losses from options writing can exceed the initial investment. Overall, she emphasizes that options trading is inherently speculative and carries significant financial risk.