Series 65: 4.1.3. Short Call

4.1.3. Short Call

Every option has both a buyer and a seller. The seller of the option is called the option writer. She believes LeanTree stock will not rise and is willing to bet on it. She writes the following call option:

Short LNTR Jul 25 call @ 3

In writing the call option, she receives the $3 premium that you as the option buyer have paid. The writer or option seller, whether of a put or a call, will always receive a premium from the buyer. This is her profit if the price of the underlying security goes down or stays the same. If the price of LeanTree drops or stays the same as she expects, she gets to keep the $300 ($3 × 100 shares). If the price of the underlying stock increases unexpectedly, he