I understand that holding short positions in naked options is risky because they are not backed by cash or stock in a brokerage account. I've noticed that some brokers allow the selling of naked puts but not naked calls. Why is that?
A stock can only lose ~100% of its value on the downside, so while the risk is high it is effectively capped and definable selling naked puts as you can't go lower than zero on equities. Selling naked calls opens you to potential infinite risk as stocks can easily rise 100s (if not 1000s in some case) of percent higher from where they currently are.
If you're a broker the naked put sellers are as a result easier to work with in terms of risk modelling due to this cap on losses.
There are 4 levels of option trading approval:
Level 1 – Covered Calls & Cash-Secured Puts
Level 2 – Long Options
Level 3 – Option Spreads
Level 4 – Naked Calls & Puts
Because a naked call has the potential for greater loss than a naked put, some brokers split Level 4 above into two levels:
Level 4 – Naked short puts
Level 5 – Naked short calls