Who buys my call option?

The buyer of a call option is referred to as a holder. The holder purchases a call option with the hope that the price will rise beyond the strike price and before the expiration date. The profit earned equals the sale proceeds, minus strike price, premium, and any transactional fees associated with the sale.

What happens if I don’t sell my call option on expiry?

If you don’t sell your options before expiration, there will be an automatic exercise if the option is IN THE MONEY. If the option is OUT OF THE MONEY, the option will be worthless, so you wouldn’t exercise them in any event.

Can you sell a call option below strike price?

If the stock trades below the strike price, the call is “out of the money” and the option expires worthless. Then the call seller keeps the premium paid for the call while the buyer loses the entire investment.

How does selling a call option work?

Selling Calls The purchaser of a call option pays a premium to the writer for the right to buy the underlying at an agreed upon price in the event that the price of the asset is above the strike price. In this case, the option seller would get to keep the premium if the price closed below the strike price.

Should you write covered calls when the option expires worthless?

Most option novices love writing covered calls when the option expires worthless. However, there are risks in this approach: the stock price may plummet, or previously high implied volatility may decline by expiration.

What is the objective when selling a call option?

The objective when selling a call option is to collect premium or extrinsic value. For example, if a stock is at $100, a call option with a strike price of a $100 might be worth $3.00. The $3.00 is the premium or extrinsic value.

What happens if you sell a call option and no buyers?

Assuming you have sold a call option and you find no buyers, this can happen in below cases: Your strike has become deep In The Money. And hence, if you are not able to square off the position, you option will be squared off automatically at expiry and you will incur a loss. You strike has become deep Out of The Money.

What happens if the price of an option does not increase?

If the price does not increase beyond the strike price, you the buyer will not exercise the option. You will suffer a loss equal to the premium of the call option. Contrarily, you sell call options with the hope that they become worthless at the expiry date.