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It depends on what you consider risk.
A lot of people think selling a stock that cost $20 for $25 when it's trading at $27 or $28 is a risk. If you're one of them, selling the call is definitely riskier. To me, selling stock that cost you $20 for $25 means you made five bucks on the deal plus whatever the premium was, so it's all good.
There are two forms of risk in buying the call. The most obvious is if the call expires out-of-the-money. If so you lose your premium. The other is this: you have to pay for calls. If you bought an Acme call with a strike price of $25 and paid a $1 premium, you need to exercise at no less than $26 to avoid losing money. If the call expires with the stock at $25.50, you lose 50 cents per share.
So...if you absolutely HAVE to make as much money as you possibly can, selling the call is riskier. If not, the buyer is more at risk.
What else can I help you with?
What is the difference between buying a call option and selling a put option?
Buying a call option gives you the right to buy a stock at a certain price, while selling a put option obligates you to buy a stock at a certain price.
What are the differences between buying a call and selling a call option?
Buying a call option gives you the right to buy a stock at a specific price, while selling a call option obligates you to sell a stock at a specific price.
What is the difference between selling to open and buying to close options contracts?
Selling to open an options contract means you are initiating a new position by selling an option, while buying to close an options contract means you are closing out an existing position by buying back the option you previously sold.
What is the poor man's covered call strategy and how can it be effectively implemented in options trading?
The poor man's covered call strategy involves buying a longer-term call option and selling a shorter-term call option against it. This can be implemented effectively by choosing the right strike prices and expiration dates to maximize potential profit while minimizing risk.
What is exercising a stock option?
Exercising options is done by the option buyer. If the buyer exercises a put, he is selling to the option writer the stock. If a call is being exercised, he is buying the stock from the writer.
What is sell a covered call?
A covered call means that you own the underlying stock on the option you are selling. Say you own 100 shares of apple computer. You sell ONE call option which allows the buyer of the option to purchase the underlying 1oo shares of stock at the strike price. If the contract matures, you can then deliver the stock to the option buyer.
Why is selling a call or put more risky than buying a call or put?
Selling calls or puts have unlimited risk, where as buying calls or puts have a maximum risk of 100%. For instance, selling a call gives you unlimited risk because there is no ceiling on how high the price can go. However buying a call has a maximum risk of 100% of the premium you pay, this happens if you let the option expire.
How do I document premium paid on covered call when the option was not exercised in the same year?
I assume you have an online brokerage account. Your options premiums in selling a covered call would automatically appear on your account record or statement.
What is the difference between selling a call option and selling a put option?
Selling a call option gives someone the right to buy a stock at a certain price, while selling a put option gives someone the right to sell a stock at a certain price.
What are the collar options strategy and how can it be effectively implemented in investment portfolios?
The collar options strategy involves buying a protective put option while simultaneously selling a covered call option on the same underlying asset. This strategy can help protect against downside risk while generating income from the call option premium. It is effectively implemented by carefully selecting strike prices and expiration dates to align with investment goals and risk tolerance.
Is spot trading is available in Stock market?
Yes. If you buy stocks for immediate delivery rather than selling a put option or buying a call option, you have made a "spot buy" of stock. It is a very common thing to do.
What are the strategies for selling butterfly spreads in options trading?
One strategy for selling butterfly spreads in options trading is to identify a range where you believe the stock price will stay within. Then, you can sell an "out-of-the-money" call option and an "out-of-the-money" put option, while simultaneously buying an "at-the-money" call option and an "at-the-money" put option. This allows you to profit if the stock price remains within the range you predicted.
