Short Call

A short call is a derivative contract that allows the seller to sell a security at a specified price (the strike price) on a specified date (the expiration date). The seller of the call receives a premium from the buyer of the call in exchange for this obligation.

If the price of the underlying security is below the strike price at expiration, the seller of the call will keep the premium and will not have to deliver the underlying security. However, if the price of the underlying security is above the strike price at expiration, the seller of the call will be obligated to sell the underlying security at the strike price, even if it is worth more than the strike price. The seller of the call will lose the difference between the strike price and the market price of the underlying security.

Short calls are often used as a bearish strategy, as they profit from a decline in the price of the underlying security. However, short calls can also be used as a bullish strategy, as they can be used to generate income or to hedge against a long position in the underlying security.

Here are some of the key features of short calls:

* The seller of the call receives a premium from the buyer of the call.
* The seller of the call is obligated to sell the underlying security at the strike price on the expiration date.
* If the price of the underlying security is below the strike price at expiration, the seller of the call will keep the premium and will not have to deliver the underlying security.
* If the price of the underlying security is above the strike price at expiration, the seller of the call will be obligated to sell the underlying security at the strike price, even if it is worth more than the strike price.
* Short calls are often used as a bearish strategy, as they profit from a decline in the price of the underlying security.
* Short calls can also be used as a bullish strategy, as they can be used to generate income or to hedge against a long position in the underlying security.