A ONE-STOP PORTAL OF INFORMATION FOR FUTURES AND COMMODITIES TRADERS
A short out-of-the-money call is an options trade in
which the seller conveys the right to the buyer to buy
futures at a specific price at any time before
expiration.
In exchange for the premium
received, the seller, or writer, of the call options
contract is obligated to sell the underlying futures
contract at the strike price at any time prior to
expiration if a holder of the options contract chooses
to exercise it.
This position maximizes profits
if the underlying futures prices stay at the strike
price or lower until expiration. Profits are limited to
the premium received while risk is unlimited on the
upside. Selling a naked out-of-the-money call is risky;
it is usually done in connection with another,
offsetting transaction. Declining volatility is
favorable to this position as is the passage of time.
