Learn options trading – Calls

A call is a contract that gives the holder the right to buy the underlying stock at a predetermined strike price, by a fixed expiration date, for a premium whose value varies depending stock price, and greeks.

The contract is written by the option seller who either owns the underlying, in the case of a covered call, or does not own the underlying, in the case of a naked call.

The buyer of the contract is called the Holder, and has a long position, the seller is called the Writer, and has a short position.

It is important to note the difference between writing and holding a call:

  • Holding a call position has limited risk with unlimited reward
  • Writing a limited reward, and writing naked calls has unlimited risk, and covered calls have a very high risk (for a stock that tends to 0).
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