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Futures Traders Helping Future Traders
Option Strategy #2: Short Call Option
Sell A Call
Use a Short Call Option strategy when you believe the market is NOT going up. The strength of
your belief determines at what strike price you should sell.
Sell out-of-the-money options (higher strike price) if you believe prices are not going up.
Sell at-the-money options (at the current price) if you strongly believe prices are not going up.
Sell in-th-money options (below current price) if you strongly believe market prices will fall.
The potential profit is limited to the premium collected, and your break even point at expiration
equals the strike price plus the premium collected. The trade profit is maximized if the market
expires below the strike price.
Your losses increase as the market rises. Above the break even is equivalent to being short the
futures contract. At expiration, your losses increase by one point for each point the market moves
above the break even point.
Because these positions have unlimited risk, you’ll need to be watch them very closely.
