Understanding how to sell call options

The buyer of a call option is bullish and believes the underlying stock will rise in price before the option expires.
When selling a call option, you’re selling the right to purchase an underlying security at a set price before a certain date.
The seller gets a premium for agreeing to deliver the underlying security for a pre-set price before a set date if the buyer demands it.
If the price stays the same or goes down, the seller keeps the premium as profit. If it goes up, the seller could lose all of the premium and more.

When you sell a call option, you’re selling the right, but not the obligation, to someone else to purchase the underlying security (stock) at a set price before a certain date (expiration). You charge a fee (premium) of a set amount per share.

If the price of the security stays the same or drops until expiration, the option expires worthless and you keep all of the premium as your profit. If the price goes up, the buyer may exercise their option and you will have…

Continue Reading →

This article was written by [email protected] (Jim Probasco) and originally published on www.businessinsider.com