short call

Option Strategy: Protective Call/Synthetic Long Put

If investors are of the view that market will go down or bearish but want to protect against an unexpected rise in the price of the stock. Suppose XYZ Ltd is trading at Rs 4457 in January. An investor Mr. A buys a Rs 4500 Call Option for Rs 100 while shorting the stock at Rs 4457. The Net credit of investor is Rs 4357 (Rs 4457- Rs 100). Strategy: Short Stock + Buy Call Option Risk is Limited  Maximum Risk(Rs 143) = Call strike Price (Rs 4500)- Stock Price (4457) +100. Rewards= Maximum is stock price-call Premium. Other Option Strategies Long Combo: Sell a Put, Buy a Call Covered C...
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Option Strategy: Short Call

In the last blog post, we discuss Buying Call strategy which is used when you expect the underlying stock/index would rise. But when you expect the underlying stock/index fall you do opposite Sell Call Option. Sell Call option is also known as the short call strategy. It is used when the investor is very bearish about the stock/index. This is a risky strategy since, as the stock price / index rises, the short call loses money more and more quickly and losses can be significant if the stock price / index falls below the strike price.
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