He is doing fine, but still very sore about that one
Let’s take a simplified example; you underwrite a call option (so, sell a call option) for a certain security, at let’s say a strike of 100$, and collect a premium for it (that would be your max gain).
If the underlying were to rise above the strike price, you would start to lose from your maximum gain, and the further the price rises, the more negative your position would turn. In this case, the buyer of the option will exercise it, and you are then obligated to sell a 100 shares of the underlying, at the agreed price of 100$.
At this point, it doesn’t matter if you already owned such 100 shares, or if you had the cash to honor the transaction; if the shares are trading at 150$, you either lose 100 shares @150$ = 15.000$ to sell those at 100$ => net loss of 5.000$, or you would have to buy the shares @150 to sell them @100 => same loss of 150$. Owning the shares as a collateral does not yield any benefit against having just cash for collateral instead.
And if the underlying were to rise even more, your maximum loss would be greater and greater. As we saw earlier, having a stop-loss to buy back the same call contract you initially sold in the market might not work; after all, if your contract is worth -5.000$, there may be nobody in the market to take on that liability.
You can hedge that risk by buying yourself a call option, at a higher strike. Say you sell your call option at a strike of 100$ like previously, and collect a premium for it; you may also buy a call option at a strike of 120$, for which you must pay a premium (that will be lower than the one you received). In effect, your maximum gain is lowered, as some of the premium you collect is used to buy a contract, but now you have capped your maximum loss to 20$ per share (- the premium gain). If the underlying were to rise more, you yourself own a call that you can exercise, and get the 100 shares you need to deliver that way.
Your maximum gain would be [Premium Collected] - [Premium spent on the higher strike option]
Your maximum loss would be ([Higher Strike] - [Lower Strike]) * 100 - [Maximum Gain]