It makes sense to buy a call option if you think the value of the stock could increase before the exercise date. You can also sell a call option if you are pessimistic about the short-term outlook for a stock. If you sell a covered call and the price of the underlying asset drops, the premium received easily compensates for your losses. Selling a call does not protect you from losing money. Call option sellers, also known as writers, sell call options in the hope that they will become worthless on the expiration date. They earn money by pocketing the bonuses (prizes) paid to them. Your profit will be reduced or may even result in a net loss if the option buyer exercises their option profitably if the price of the underlying security rises above the exercise price of the option. Call options are sold in two ways: A call option gives you the right, but not the requirement, to buy a stock at a specific price (known as an exercise price) until a specific date on which the option expires. For this right, the buyer of the call pays a sum of money called premium that the seller of the call receives. Unlike stocks, which can live on a long-term basis, an option ceases to exist after expiration and ends up either worthless or with a certain value.

Call options allow their holders to profit from an increase in the price of an underlying share while paying only a fraction of the purchase cost of the actual shares. This is a leveraged investment that offers potentially unlimited profits and limited losses (the price paid for the option). Due to the high leverage, call options are considered risky investments. They note that the share price remains at $12 two weeks before closing. You sell the contract for $0.50 ($50), get back half of the premium you paid, and mitigate your losses. A call option is hedged if the seller of the call option actually owns the underlying stock. Selling call options on these underlying shares results in additional revenue and compensates for expected declines in the share price. The seller of options is “hedged” against a loss because in the event that the buyer of options exercises his option, the seller can provide the buyer with shares of the share he has already purchased at a price lower than the exercise price of the option. The seller`s profit from ownership of the underlying share is limited to the rise of the share up to the exercise price of the option, but it is protected against actual losses.

If the share price rises significantly, buying a call option offers much better profits than owning the stock. To make a net profit from the option, the stock must exceed the strike price to offset the premium paid to the call seller. In the example above, the call breaks even at $55 per share. The appeal of sales calls is that you get a cash reward in advance and don`t have to present something right away. Then wait until the stock has expired. If the stock goes down, stays stable or even goes up a bit, you`ll make money. However, you won`t be able to multiply your money in the same way as a call buyer. As a call seller, the highest thing you`ll earn is the premium. For every call purchased, one call is sold.

So, what are the benefits of selling a call? In short, the payment structure is quite the opposite for the purchase of a call. Call sellers expect the stock to remain stable or falling, and hope to be able to take the premium without consequences. Selling to close is simply the action of closing the position by selling the contract. In options trading, both short and long positions are taken through purchased contracts. Once a contract belongs to a merchant, it can only be settled in three ways. First of all, the option is out of the money and expires worthless. Second, the option is in the money and can be exercised to trade the underlying asset or pay for the difference. Third, the option can be sold to close the position. A sell order at closing can be made with the option in money, out of money or even out of money. An option is called a contract, and each contract represents 100 shares of the underlying stock. Exchanges quote option prices in terms of price per share, not the total price you have to pay to own the contract.

For example, an option can be listed on the stock exchange at $0.75. So to buy a contract, it costs (100 shares * 1 contract * $0.75) or $75. In the world of buying and selling stock options, decisions are made about the best strategy when reviewing a trade. Investors who are bullish can buy a call or sell a put, while if they are bearish, they can buy a put or sell a call. An investor in a put option bets that the share price will fall below the strike price. The holder of a put option has the right to sell the security at a certain price at any time during the exercise date. Tip: When selling at the end, the original buyer becomes the seller. The original seller is now obliged to sell to the new buyer upon request. Selling call options offers both advantages and disadvantages to buying and selling securities. .