Short Call Strategy

The short call option strategy is a bearish options trading strategy with a limited profit potential with theoretical unlimited loss. Suited for neutral to bearish outlook. Suitable for experienced traders with approval for highest level of options trading


-Sell 1 call option

Note: like most options strategies, calls can be purchased in-the-money (ITM), at-the-money (ATM), or out-of-the-money (OTM).

Preference : Sell an 16-20 delta OTM call

Trade Example

-Stock XYZ is trading at $28 a share.
-Sell 30 call for $0.53

Profit and Loss Diagram

Short Call Summary

Break Even Price Strike Price + Premium Received
Limited to initial premium received
Maximum Profit ScenarioStock stays at below the strike price
Maximum Loss ScenarioStock goes higher than Breakeven Price
Why Trade If you are bearish on a stock you can use this option strategy.
When to TradeStock Assumption : Bearish
Volatility : When volatility is high, so you gather more premium to open the trade
When to CloseWhen the trade is making 50% of max possible profit
Legs1 leg
Passage of timePositive.
With passage of time, the value of this option decreases which is positive for your portfolio
Increase in volatilityNegative.
With increase in volatility, the value of option increases.