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Only above that level does the call buyer make money. If the stock finishes expiration between $20 and $22, the call option will still have some value, but overall the trader will lose money.
A covered call involves selling a call option (“going short”) but with a twist. Here the trader sells a call but also buys the stock underlying the option, 100 shares for each call sold.
In their most basic form, a call option gives you the right to buy 100 shares of an underlying stock at a given price by a given date, while buying a put option works in the opposite manner: You ...
Buy call options on long-term winners. Call options rise in price when the underlying stock rises in price, and this basic option strategy gives the call owner the ability to profit with unlimited ...
Mildly bullish trading strategies are options that make money as long as the underlying asset price does not decrease to the strike price by the option's expiration date. These strategies may provide downside protection as well. Writing out-of-the-money covered calls is a good example of such a strategy. The purchaser of the covered call is ...
Option values vary with the value of the underlying instrument over time. The price of the call contract must act as a proxy response for the valuation of: the expected intrinsic value of the option, defined as the expected value of the difference between the strike price and the market value, i.e., max[S−X, 0]. [3]
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