If you sell an option naked, meaning that you dont hold an equal amount of some other long option or 100 shares (long shares for call and short shares for put)of the underlying equity per contract, then there is larger risk. If you do sell an option and buy it back at .01, then the difference between what you sold it at and what you covered it is your profit.
Selling naked calls carries the risk that if the trade goes against you to the upside, you could theoretically lose more than your account is worth, so it is recommended that you not sell calls naked. A gap up can wipe you out quickly.
Selling naked puts has high risk as well. If you sell a put and the stock goes below your strike, you will be forced to buy the stock at the strike price you sold less the premium you were paid. For example if you sold a 50.00 put and was paid 2.00 for selling the put, and you were put the stock, you would really be buying the stock for 48.00 Your risk of max loss is if the underlying goes to zero. You need enough money in your account to buy the stock as well if you sell puts. Selling puts naked is recommended only if you are willing and able to buy the stock. I sell puts on stock that are at support and expected to bounce. If I am put the stock, then I sell covered calls against them.
There are ways to sell calls or puts with managed risk and that is by using spreads of some type. Diagonals, calendars, verticals, butterflies, ratios, iron condors or a mixture of any of the above. It takes a little while to understand the risk/reward on each of these type of strategies. Each of these stratagies should be explored to learn the risk/reward. If I were to type them, it would take hours and pages.
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