{"id":2093,"date":"2018-08-27T16:57:42","date_gmt":"2018-08-27T15:57:42","guid":{"rendered":"http:\/\/www.wasteyourtime.co\/?p=2093"},"modified":"2020-03-25T14:18:32","modified_gmt":"2020-03-25T14:18:32","slug":"call-options-2","status":"publish","type":"post","link":"https:\/\/traders-paradise.com\/magazine\/2018\/08\/call-options-2\/","title":{"rendered":"Call options -How to sell &#038; write"},"content":{"rendered":"<p style=\"text-align: right;\"><i><span style=\"font-weight: 400;\">4 min read<\/span><\/i><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-2101\" src=\"https:\/\/traders-paradise.com\/magazine\/wp-content\/uploads\/2018\/08\/how-to-sell-write-options-7.jpg\" alt=\"How to sell &amp; write options? 6\" width=\"635\" height=\"285\" srcset=\"https:\/\/traders-paradise.com\/magazine\/wp-content\/uploads\/2018\/08\/how-to-sell-write-options-7.jpg 635w, https:\/\/traders-paradise.com\/magazine\/wp-content\/uploads\/2018\/08\/how-to-sell-write-options-7-300x135.jpg 300w, https:\/\/traders-paradise.com\/magazine\/wp-content\/uploads\/2018\/08\/how-to-sell-write-options-7-370x166.jpg 370w, https:\/\/traders-paradise.com\/magazine\/wp-content\/uploads\/2018\/08\/how-to-sell-write-options-7-424x190.jpg 424w\" sizes=\"auto, (max-width: 635px) 100vw, 635px\" \/><\/p>\n<p><span style=\"font-weight: 400;\">Call options are an investment contract in which a fee is paid for the right to buy or sell shares at a future date. When we are talking about writing a put or call option we are speaking about an <a href=\"https:\/\/traders-paradise.com\/magazine\/2019\/03\/trading-options\/\">investment contract<\/a> in which a fee is paid for the right to buy or sell shares at a future date. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Put and call options for <a href=\"http:\/\/traders-paradise.com\/magazine\/2018\/08\/how-to-buy-stock-options\">stocks<\/a> are typically sold in lots of 100 shares.<\/span><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_74 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/traders-paradise.com\/magazine\/2018\/08\/call-options-2\/#A_little_review_of_history\" >A little review of history.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/traders-paradise.com\/magazine\/2018\/08\/call-options-2\/#Typically_a_call_is_sold_against_long_stock\" >Typically, a call is sold against long stock.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/traders-paradise.com\/magazine\/2018\/08\/call-options-2\/#When_you_BUY_call_options_you_bought_it_from_someone\" >When you BUY call options, you bought it from someone.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/traders-paradise.com\/magazine\/2018\/08\/call-options-2\/#Selling_options_is_a_bit_more_complex_than_buying_options\" >Selling options is a bit more complex than buying options.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/traders-paradise.com\/magazine\/2018\/08\/call-options-2\/#To_be_clear_with_more_details\" >To be clear with more details.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/traders-paradise.com\/magazine\/2018\/08\/call-options-2\/#When_you_sell_a_covered_call_you_are_actually_selling_a_synthetic_put\" >When you sell a covered call you are actually selling a synthetic put.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/traders-paradise.com\/magazine\/2018\/08\/call-options-2\/#Well_this_may_prove_difficult_at_times_but_it_isnt_easy_to_make_money\" >Well, this may prove difficult at times, but it isn&#8217;t easy to make money. \u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/traders-paradise.com\/magazine\/2018\/08\/call-options-2\/#There_must_be_a_seller_for_every_option_buyer\" >There must be a seller for every option buyer.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/traders-paradise.com\/magazine\/2018\/08\/call-options-2\/#There_are_several_resolutions_that_must_be_made_before_selling_options\" >There are several resolutions that must be made before selling options:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/traders-paradise.com\/magazine\/2018\/08\/call-options-2\/#Here_are_the_key_things_you_should_remember_with_respect_to_buying_and_selling_call_options\" >Here are the key things you should remember with respect to buying and selling call options.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/traders-paradise.com\/magazine\/2018\/08\/call-options-2\/#Selling_a_call_option_is_also_called_%E2%80%98Shorting_a_call_option_or_simply_%E2%80%98Short_Call\" >Selling a call option is also called \u2018Shorting a call option\u2019 or simply \u2018Short Call\u2019. \u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/traders-paradise.com\/magazine\/2018\/08\/call-options-2\/#Selling_a_call_option_requires_you_to_deposit_a_margin\" >Selling a call option requires you to deposit a margin.<\/a><\/li><\/ul><\/nav><\/div>\n<h4><span class=\"ez-toc-section\" id=\"A_little_review_of_history\"><\/span><strong>A little review of history. <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p><span style=\"font-weight: 400;\"><a href=\"https:\/\/traders-paradise.com\/trading-dictionary\/o\/option\/\">The origins<\/a> of writing an option date back to ancient times. Don&#8217;t think it is something new. <\/span><i>Aristotle<\/i><span style=\"font-weight: 400;\">, the Greek philosopher, recorded an early example of options trading in his <\/span><b><i>&#8221;Politics&#8221;.<\/i><\/b><\/p>\n<p><span style=\"font-weight: 400;\">The philosopher and mathematician <\/span><i>Thales of Miletus<\/i><span style=\"font-weight: 400;\"> studied astronomy as a way to predict olive harvests for his region. Thales believed there would be a coming bountiful olive harvest. But did not have the money to buy his own olive presses. So instead paid a fee for the right to access the olive presses of others.<\/span><\/p>\n<p><b>Do you see? This was the first options contract<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">So<\/span><b><i>, writing a call option means that you are selling a call option<\/i><\/b><span style=\"font-weight: 400;\">. If you sell a call (also known as a &#8220;short call&#8221;) then you are obliged to sell stock at the strike price.<\/span><\/p>\n<h4><span class=\"ez-toc-section\" id=\"Typically_a_call_is_sold_against_long_stock\"><\/span><strong>Typically, a call is sold against long stock.<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p><span style=\"font-weight: 400;\">When you buy some option $400 call option that you have the right to buy 100 shares of some company at $400. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">And maybe you asked yourself the question &#8220;who exactly am I buying it from?&#8221; <\/span><\/p>\n<p><span style=\"font-weight: 400;\">To have the right to buy the stock at the strike price, somebody has had to take the other side of that transaction and agreed to give you the right to buy it. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">The ones that take the opposite side of the call option buyer are the &#8220;call option sellers.&#8221; And sometimes they are known as &#8220;call option writers&#8221;.<\/span><\/p>\n<h4><span class=\"ez-toc-section\" id=\"When_you_BUY_call_options_you_bought_it_from_someone\"><\/span><strong>When you BUY call options, you bought it from someone. <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p><a href=\"https:\/\/traders-paradise.com\/recommends\/city_index_uk\/\" target=\"\" rel=\"noopener noreferrer\"><br \/>\n<img decoding=\"async\" class=\"size-full alignright\" src=\"http:\/\/traders-paradise.com\/magazine\/wp-content\/uploads\/ads9-2.png\" alt=\"\" \/><br \/>\n<\/a><br \/>\n<span style=\"font-weight: 400;\">That means that someone is giving you the rights to buy the underlying stock at the strike price by selling you that option. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">The act of <\/span><b>CREATING<\/b><span style=\"font-weight: 400;\"> and <\/span><b>SELLING<\/b><span style=\"font-weight: 400;\"> that call options contract to you by that person is the act of <\/span><b>WRITING<\/b><span style=\"font-weight: 400;\"> a call option. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">In execution, this means opening a call options position using the <\/span><b>SELL TO OPEN<\/b><span style=\"font-weight: 400;\"> order. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">When you do that, you create a new call options contract for trading in the options market and that is known as \u201c<\/span><b><i>Write<\/i><\/b><span style=\"font-weight: 400;\">\u201d a call options contract because you are exactly \u201c<\/span><b><i>writing it up<\/i><\/b><span style=\"font-weight: 400;\">\u201d.<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-2094 size-full\" src=\"https:\/\/traders-paradise.com\/magazine\/wp-content\/uploads\/2018\/08\/how-to-sell-write-options.gif\" alt=\"\" width=\"525\" height=\"400\" \/><\/p>\n<p><span style=\"font-weight: 400;\">Selling options, whether Calls or Puts, is a popular trading technique to increase the returns on the portfolio. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Selling Premium can prove successful when performed on a selective basis. But, if you don\u2019t follow some specific guidelines, your long-term prospect of profitability is doubtful. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Selling options for Income can be debatable because you don&#8217;t know are you making money with your options trading. When you take a look in your overall portfolio it can be difficult to measure each transaction success.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">But in this environment is yield-seeking, and selling options is a strategy designed to generate current income.<\/span><\/p>\n<h4><span class=\"ez-toc-section\" id=\"Selling_options_is_a_bit_more_complex_than_buying_options\"><\/span><strong>Selling options is a bit more complex than buying options. <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p><span style=\"font-weight: 400;\">That can involve extra risk. If sold options expire worthlessly, the seller gets to keep the money received for selling them.<\/span><\/p>\n<h4><span class=\"ez-toc-section\" id=\"To_be_clear_with_more_details\"><\/span><strong>To be clear with more details. <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p><span style=\"font-weight: 400;\">There are <\/span><a href=\"http:\/\/traders-paradise.com\/magazine\/2018\/08\/what-are-options\">two types of call option selling<\/a><span style=\"font-weight: 400;\">. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">If you bought a call option and the price has gone up you can always just sell the call on the open market. This type of transaction is called a &#8220;<\/span><b><i>Sell to Close<\/i><\/b><span style=\"font-weight: 400;\">&#8221; transaction because you are selling a position that you currently have. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">If you do not currently own the call option, but rather you are creating a new option contract and selling someone the right to buy the stock from you, then this is called &#8220;<\/span><b><i>Sell to Open<\/i><\/b><span style=\"font-weight: 400;\">&#8220;, &#8220;<\/span><b><i>Writing an Option<\/i><\/b><span style=\"font-weight: 400;\">&#8220;, or sometimes just &#8220;<\/span><b><i>Selling an Option<\/i><\/b><span style=\"font-weight: 400;\">.&#8221;<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-2095 alignleft\" src=\"https:\/\/traders-paradise.com\/magazine\/wp-content\/uploads\/2018\/08\/how-to-sell-write-options-2.png\" alt=\"How to sell &amp; write options? 1\" width=\"375\" height=\"245\" srcset=\"https:\/\/traders-paradise.com\/magazine\/wp-content\/uploads\/2018\/08\/how-to-sell-write-options-2.png 375w, https:\/\/traders-paradise.com\/magazine\/wp-content\/uploads\/2018\/08\/how-to-sell-write-options-2-300x196.png 300w, https:\/\/traders-paradise.com\/magazine\/wp-content\/uploads\/2018\/08\/how-to-sell-write-options-2-370x242.png 370w\" sizes=\"auto, (max-width: 375px) 100vw, 375px\" \/><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-2096 alignright\" src=\"https:\/\/traders-paradise.com\/magazine\/wp-content\/uploads\/2018\/08\/how-to-sell-write-options-3.png\" alt=\"How to sell &amp; write options? 2\" width=\"375\" height=\"245\" srcset=\"https:\/\/traders-paradise.com\/magazine\/wp-content\/uploads\/2018\/08\/how-to-sell-write-options-3.png 375w, https:\/\/traders-paradise.com\/magazine\/wp-content\/uploads\/2018\/08\/how-to-sell-write-options-3-300x196.png 300w, https:\/\/traders-paradise.com\/magazine\/wp-content\/uploads\/2018\/08\/how-to-sell-write-options-3-370x242.png 370w\" sizes=\"auto, (max-width: 375px) 100vw, 375px\" \/><b><i>Writing or selling a call option<\/i><\/b><span style=\"font-weight: 400;\"> is when you give the buyer of the call option the right to buy a stock from you at a certain price by a certain date. Simpler, the seller (also known as the writer) of the call option can be forced to sell a stock at the strike price. The seller of the call receives the premium that the buyer of the call option pays. If the seller of the call owns the underlying stock, then it is called &#8220;<\/span><b><i>writing a covered call<\/i><\/b><span style=\"font-weight: 400;\">.&#8221; If the seller of the call does <\/span><b>NOT<\/b><span style=\"font-weight: 400;\"> own the underlying stock, then it is called &#8220;<\/span><b><i>writing a naked call<\/i><\/b><span style=\"font-weight: 400;\">.&#8221; A covered call enables you to own a stock with unlimited downside risk and collect a premium for the call you sold. <\/span><\/p>\n<h4><span class=\"ez-toc-section\" id=\"When_you_sell_a_covered_call_you_are_actually_selling_a_synthetic_put\"><\/span><strong>When you sell a covered call you are actually selling a synthetic put. <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p><span style=\"font-weight: 400;\">If you are not comfy selling naked puts, then you should not be comfy selling a covered call. It is exactly the same as selling a put. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">If you are comfortable with the covered call, then there are numerous factors to analyze when entering any options position.<\/span><\/p>\n<p>Now, it is convenient to look at what factors can make a trade more likely to be profitable than another.<\/p>\n<p><span style=\"font-weight: 400;\">At the top of any list is liquidity or the percentage of the difference between the bid and ask. <\/span><br \/>\n<span style=\"font-weight: 400;\">If you are giving away too great a percentage to the market-makers or algorithms, then the costs of entering the transaction are too high. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">You should look to trade an options contract that has a bid\/ask spread of less than 1.5%. Always consider that the more you give away to the bid\/ask spread, not only entering but exiting the transaction. <\/span><\/p>\n<h4><span class=\"ez-toc-section\" id=\"Well_this_may_prove_difficult_at_times_but_it_isnt_easy_to_make_money\"><\/span><strong>Well, this may prove difficult at times, but it isn&#8217;t easy to make money. \u00a0<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p><span style=\"font-weight: 400;\">Besides this, all trade evaluations must consider the cost of commissions. While all of these costs make profitable trading that much more difficult, they must be included in your analysis. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">You should consider the relative strength index of the underlying, extreme conditions tend to provide more interesting trading opportunities.<\/span><\/p>\n<p><span style=\"font-weight: 400;\"> A seller is obligated to buy or sell an underlying security at a specified strike price if the buyer chooses to exercise the option. <\/span><\/p>\n<h4><span class=\"ez-toc-section\" id=\"There_must_be_a_seller_for_every_option_buyer\"><\/span><strong>There must be a seller for every option buyer.<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<h4><span class=\"ez-toc-section\" id=\"There_are_several_resolutions_that_must_be_made_before_selling_options\"><\/span><b><i>There are several resolutions that must be made before selling options:<\/i><\/b><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p><b><i>1) What security to sell options on<\/i><\/b><br \/>\n<b><i>2) The type of option (call or put)<\/i><\/b><br \/>\n<b><i>3) The type of order (market, limit, stop-loss, stop-limit, trailing-stop-loss, or trailing-stop-limit)<\/i><\/b><br \/>\n<b><i>4) Trade amount that can be supported<\/i><\/b><br \/>\n<b><i>5) The number of options to sell<\/i><\/b><br \/>\n<b><i>6) The expiration month<\/i><\/b><\/p>\n<p>When all this information is collected, a trader goes into the brokerage account, select security and go to an options chain. Once an option has been selected, the trader goes to the options trade ticket. Then enter a sell to open order to sell options and makes the appropriate selections to place the order.<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Here_are_the_key_things_you_should_remember_with_respect_to_buying_and_selling_call_options\"><\/span><b>Here are the key things you should remember with respect to buying and selling call options.<\/b><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p><b><i>You buy a call option only when you are bullish about the underlying asset.<\/i><\/b><\/p>\n<p>Upon expiry, the call option will be profitable only if the underlying has moved over and above the strike price. Buying a call option is also referred to as \u2018Long on a Call Option\u2019 or simply \u2018Long Call\u2019. To buy a call option you need to pay a premium to the option writer.<\/p>\n<p>The call option buyer has a limited risk (to the extent of the premium paid) and a potential to make an unlimited profit. The breakeven point is the point at which the call option buyer neither makes money nor experiences a loss.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-2099 alignleft\" src=\"http:\/\/traders-paradise.com\/magazine\/wp-content\/uploads\/how-to-sell-write-options-5-e1535385033409.jpg\" alt=\"How to sell &amp; write options? 4\" width=\"350\" height=\"189\" \/><b>P&amp;L = Max [0, (Spot Price \u2013 Strike Price)] \u2013 Premium Paid<\/b><br \/>\n<b>Breakeven point = Strike Price + Premium Paid<\/b><br \/>\n<span style=\"font-weight: 400;\">When you sell a call option (also called option writing) only when you believe that upon expiry, the underlying asset will not increase beyond the strike price. <\/span><\/p>\n<h4><span class=\"ez-toc-section\" id=\"Selling_a_call_option_is_also_called_%E2%80%98Shorting_a_call_option_or_simply_%E2%80%98Short_Call\"><\/span><strong>Selling a call option is also called \u2018<i>Shorting a call option<\/i>\u2019 or simply \u2018<i>Short Call\u2019<\/i><\/strong><span style=\"font-weight: 400;\"><strong>.<\/strong> \u00a0<\/span><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p><span style=\"font-weight: 400;\">When you sell a call option you receive the premium amount. The profit of an option seller is restricted to the premium he receives, however his loss is potentially unlimited. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">The breakdown point is the point at which the call option seller gives up all the <a href=\"http:\/\/traders-paradise.com\/magazine\/2018\/08\/market-dictionary-and-jargon-in-trading-options\">premium<\/a> he has made, which means he is neither making money nor is losing money. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u00a0<\/span><br \/>\n<span style=\"font-weight: 400;\">Since short option position carries unlimited risk, he is required to deposit margin. Margins in case of short options are similar to futures margin.<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignright wp-image-2100 size-full\" src=\"https:\/\/traders-paradise.com\/magazine\/wp-content\/uploads\/2018\/08\/how-to-sell-write-options-6-e1535385134405.jpg\" alt=\"\" width=\"350\" height=\"187\" srcset=\"https:\/\/traders-paradise.com\/magazine\/wp-content\/uploads\/2018\/08\/how-to-sell-write-options-6-e1535385134405.jpg 350w, https:\/\/traders-paradise.com\/magazine\/wp-content\/uploads\/2018\/08\/how-to-sell-write-options-6-e1535385134405-300x160.jpg 300w\" sizes=\"auto, (max-width: 350px) 100vw, 350px\" \/><br \/>\n<b>P&amp;L = Premium \u2013 Max [0, (Spot Price \u2013 Strike Price)]<\/b><br \/>\n<b>Breakdown point = Strike Price + Premium Received<\/b><br \/>\n<b><i>When you are bullish on a stock<\/i><\/b> <b><i>you can either buy the stock in the spot, buy its futures, or buy a call option.<\/i><\/b><\/p>\n<p>&nbsp;<\/p>\n<p><b><i>When you are bearish on a stock you can either sell the stock in the spot (although on an intraday basis), short futures, or short a call option.<\/i><\/b><\/p>\n<p>The calculation of the intrinsic value for the call option is standard, it does not change based on whether you are an option buyer\/ seller.<\/p>\n<p>You sell a call option when you are bearish on a stock.<\/p>\n<p>When you sell a call option you receive a premium.<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Selling_a_call_option_requires_you_to_deposit_a_margin\"><\/span><b>Selling a call option requires you to deposit a margin.<\/b><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>When you sell a call option your profit is limited to the extent of the premium you receive and your loss can potentially be unlimited.<\/p>\n<p>Nothing more, nothing less.<\/p>\n<p><a href=\"https:\/\/traders-paradise.com\/magazine\/2018\/07\/money-risk-trading\"><b>Risk Disclosure (read carefully!)<\/b><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>4 min read Call options are an investment contract in which a fee is paid for the right to buy or sell shares at a future date. When we are talking about writing a put or call option we are speaking about an investment contract in which a fee is paid for the right to [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":2102,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[1013,1012],"tags":[404,405,406,407,408,409,410],"class_list":["post-2093","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stocks","category-traders-secrets","tag-call-option","tag-how-to-sell-option","tag-how-to-write-option","tag-long-call","tag-put-option","tag-short-call","tag-writing-a-naked-call"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Call options -How to sell &amp; write - Traders-Paradise<\/title>\n<meta name=\"description\" content=\"Call options are contract in which a fee is paid for the right to buy or sell shares at a future date. 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