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A short call is the sale of a call option. With a short call, the trader promises to sell the stock at a specific price by a specific date to the buyer of that call.
Option values vary with the value of the underlying instrument over time. The price of the call contract must act as a proxy response for the valuation of: the expected intrinsic value of the option, defined as the expected value of the difference between the strike price and the market value, i.e., max[S−X, 0]. [3]
Options can generate big profits in a short period of time, ... For example, if a call option has a strike price of $40 and the stock price is $45, the option has an intrinsic value of $5.
Call options vs. put options The other major kind of option is called a put option, and its value increases as the stock price goes down. So traders can wager on a stock’s decline by buying put ...
A naked option involving a "call" is called a "naked call" or "uncovered call", while one involving a "put" is a "naked put" or "uncovered put". [1] The naked option is one of riskiest options strategies, and therefore most brokers restrict them to only those traders that have the highest options level approval and have a margin account. Naked ...
Option contracts may be quite complicated; however, at minimum, they usually contain the following specifications: [8] whether the option holder has the right to buy (a call option) or the right to sell (a put option) the quantity and class of the underlying asset(s) (e.g., 100 shares of XYZ Co. B stock)
A long call ladder consists of buying a call at one strike price and selling a call at each of two higher strike prices, while a long put ladder consists of buying a put at one strike price and selling a put at each of two lower strike prices. [1] A short ladder is the opposite position, in which one option is sold and the other two are bought. [1]
Call option: A call option gives its buyer the right, but not the obligation, to buy a stock at the strike price prior to the expiration date.
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