A Sunny Side Up strategy is a bullish strategy that entails a long ATM call spread with an upside naked short call to finance it. Essentially, you are able to pay for your upside directional play with the premium from selling the OTM call. Your hypothesis is bullish, but you want a mild upward move in the stock because you do not want your short call strike to be breeched. The optimal scenario is for the underlying to stay above the short strike on your long call spread but below the strike on your naked short call.
If you are able to put this trade on for a credit, or even money, then you’ll have no risk to the downside. Here, all of your risk is to the upside, if the underlying moves above the strike on your naked short call. As we see in the segment, however, it can be challenging to collect enough credit from the naked short call to eliminate all downside risk.