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www.Options-Trading-Education.com
 Options traders often profit from selling call options

without owning stock.

http://www.profitableinvestingtips.com/st...
 In this variety of uncovered options trading the trader

believes that the price of the equity underlying the
options co...
 The trader receives a premium for selling the call

contract.

http://www.profitableinvestingtips.com/stockinvesting/unh...
 This is his profit so long as the buyer does not

exercise the contract.

http://www.profitableinvestingtips.com/stockin...
 If the price of the equity rises sufficiently the trader

will exercise the option in order to buy the equity.

http://w...
 When this happens the seller needs to purchase the

stock at the current market price.

http://www.profitableinvestingti...
 However, he will sell it to the buyer at the strike price

of the contract.

http://www.profitableinvestingtips.com/stoc...
 He will lose money on the difference. In such a case

of selling call options without owning stock the loss
for the sell...
 If the equity rises significantly in price the trader can

lose a lot of money when selling call options without
owning ...
 That having been said, sellers of options tend to

make more money than buyers of options over the
long term.

http://ww...
 A call option is a financial contract between two

parties.

http://www.profitableinvestingtips.com/stockinvesting/unh-s...
 The buyer of the call option has the right, but is

under no obligation to buy an agreed quantity of a
particular equity...
 Unlike the buyer, the seller of a call option is obliged

to sell the equity whether he has it in his possession
or not....
 The buyer pays a fee to the seller for the rights

inherent in the contract.

http://www.profitableinvestingtips.com/sto...
 When an options seller does not possess the equity

in question he needs to have money in a margin
account sufficient to...
 When trading European style options the contract

can only be executed on expiration.

http://www.profitableinvestingtip...
 In American style options trading the buyer can

exercise the contract at any time during the course
of the contract.

h...
Choosing Options to

Sell

http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
 In selling call options without owning stock it is wise

to choose stable stocks or stocks likely to fall in
value.

htt...
 Traders often consult the VIX. This is a weighted

measure of options on the S&P 500 index.

http://www.profitableinvest...
 It measures out of the money calls and puts. The

VIX uses a mathematical formula to produce its
number.

http://www.pro...
 This is a measure of volatility but not necessarily a

predictor or market direction.

http://www.profitableinvestingtip...
 A trader wishing to make money selling call options

without owning stock will prefer a low VIX number.

http://www.prof...
 A buyer will obviously prefer the opposite. As in

trading stocks directly an options trader should
consult both stock f...
 And, as in all trading it is wise to sit out any and all

trades which you do not understand.

http://www.profitableinve...
 Options help buyers hedge risks but the entity that

provides the insurance in these situations in the
options seller.

...
Selling Call Options without Owning Stock
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Selling Call Options without Owning Stock

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http://www.options-trading-education.com/14397/selling-call-options-without-owning-stock/

Selling Call Options without Owning Stock

Options traders often profit from selling call options without owning stock. In this variety of uncovered options trading the trader believes that the price of the equity underlying the options contract will remain the same or fall in price. The trader receives a premium for selling the call contract. This is his profit so long as the buyer does not exercise the contract. If the price of the equity rises sufficiently the trader will exercise the option in order to buy the equity. When this happens the seller needs to purchase the stock at the current market price. However, he will sell it to the buyer at the strike price of the contract. He will lose money on the difference. In such a case of selling call options without owning stock the loss for the seller is the difference between the market price and the strike price plus fees and commissions. If the equity rises significantly in price the trader can lose a lot of money when selling call options without owning stock. That having been said, sellers of options tend to make more money than buyers of options over the long term.

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Transcript of "Selling Call Options without Owning Stock"

  1. 1. By www.Options-Trading-Education.com
  2. 2.  Options traders often profit from selling call options without owning stock. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  3. 3.  In this variety of uncovered options trading the trader believes that the price of the equity underlying the options contract will remain the same or fall in price. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  4. 4.  The trader receives a premium for selling the call contract. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  5. 5.  This is his profit so long as the buyer does not exercise the contract. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  6. 6.  If the price of the equity rises sufficiently the trader will exercise the option in order to buy the equity. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  7. 7.  When this happens the seller needs to purchase the stock at the current market price. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  8. 8.  However, he will sell it to the buyer at the strike price of the contract. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  9. 9.  He will lose money on the difference. In such a case of selling call options without owning stock the loss for the seller is the difference between the market price and the strike price plus fees and commissions. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  10. 10.  If the equity rises significantly in price the trader can lose a lot of money when selling call options without owning stock. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  11. 11.  That having been said, sellers of options tend to make more money than buyers of options over the long term. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  12. 12. Call Contracts in Options Trading http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  13. 13.  A call option is a financial contract between two parties. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  14. 14.  The buyer of the call option has the right, but is under no obligation to buy an agreed quantity of a particular equity from the seller at a specified time called the expiration date for a set price called the strike price. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  15. 15.  Unlike the buyer, the seller of a call option is obliged to sell the equity whether he has it in his possession or not. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  16. 16.  The buyer pays a fee to the seller for the rights inherent in the contract. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  17. 17.  When an options seller does not possess the equity in question he needs to have money in a margin account sufficient to cover his losses. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  18. 18.  When trading European style options the contract can only be executed on expiration. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  19. 19.  In American style options trading the buyer can exercise the contract at any time during the course of the contract. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  20. 20. Choosing Options to Sell http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  21. 21.  In selling call options without owning stock it is wise to choose stable stocks or stocks likely to fall in value. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  22. 22.  Traders often consult the VIX. This is a weighted measure of options on the S&P 500 index. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  23. 23.  It measures out of the money calls and puts. The VIX uses a mathematical formula to produce its number. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  24. 24.  This is a measure of volatility but not necessarily a predictor or market direction. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  25. 25.  A trader wishing to make money selling call options without owning stock will prefer a low VIX number. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  26. 26.  A buyer will obviously prefer the opposite. As in trading stocks directly an options trader should consult both stock fundamentals and technical measures of market sentiment before buying or selling options contract. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  27. 27.  And, as in all trading it is wise to sit out any and all trades which you do not understand. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems
  28. 28.  Options help buyers hedge risks but the entity that provides the insurance in these situations in the options seller. http://www.profitableinvestingtips.com/stockinvesting/unh-stock-response-to-obama-careproblems

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