What's next for a Short Call？
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How to set up a Short Call on moomoo？
After selling a call option, what might the trader do? | |
Option 1: Take no action | Scenario 1: Buyers do not exercise the option Your Profit = Option Premium * Contract Multiplier * Number of Contracts Option buyers can choose to exercise early or at expiration. Generally, if an option is out-of-the-money, the buyer won't exercise it. If buyers don't exercise their options, you won't need to sell the shares, and no action is required. Scenario 2: Buyers exercise the option If your short option is in-the-money on the expiration date, you will most likely be assigned. If you are not assigned, you are not required to fulfill your obligation to sell the stock. If you are assigned to fulfill your obligation, please refer to the following: Your Profit or Loss (unrealized) = (Premium Earned + Strike Price - Current Stock Price) * Contract Multiplier * Number of Contracts This profit/loss would be on paper because you would be taking on the short position of the associated underlying stock. To realize the profit/loss, you would have to then buy the shares of the stock. If the account holds the underlying stock: The system will automatically sell the underlying stock in the account to the option buyer at the strike price. If the account does not hold the underlying stock but has sufficient margin/cash: The system will automatically use the margin/cash in the account to buy the underlying stock from the market at the current market price, and then sell the underlying stock to the option buyer at the strike price. If you were holding a short call position that was exercised, you would then be put short the equivalent number of shares of the underlying stock which you could choose to hold or buy to close to exit the position. If your account neither holds the underlying stock nor has sufficient margin/cash: Your account will be marked as "dangerous", Moomoo Financial Inc. reserves the right to liquidate your assets to close the option position. |
Option 2: Close the position | Close the position before expiration to take any profits or help limit loss Your Profit or Loss = (Premium Earned - Premium Paid) * Contract Multiplier * Number of Contracts The method is similar to buying a call option: you only need to buy to close the previously sold position. |
Option 3: Rollover | Close the current option position (realizing any gains or losses) and open a new option position May be done in an effort to help manage risk or increase potential profit. |
This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. Read more
