Learn options trading – Sell call ( Short call)

Selling, or writing a call creates the obligation to sell a stock at a predetermined strike price. This contract is sold for a premium, and if the stock does not reach the strike price by expiration, the contract will expire worthless, therefore the writer will keep the premium as a profit. However, if the stock does rise beyond the strike price, the writer will be obligated to sell the stock at that strike.

If the call writer does not have the underlying stock on hand, a short position on the stock will be created, this is called a naked call. If the writer does own the underlying stock, the position is called a covered call, and that stock must be sold at the strike price.

Shorting a call is profitable in a bearish market.

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