Short Out-of-the-Money Call
Example: XYZ stock is trading at $86
Outlook: You are neutral to bearish on XYZ stock.
Possible Strategy: Sell Out of the Money Call
Sell one XYZ November 90 strike call @ $.70
- Maximum Profit = Premium received for sale of call.
- Maximum Profit = $.70
- Breakeven = Short Call strike price + Premium received
- Breakeven = 90 + .70 = 90.70
In Summary: Selling an out of the money call option is a neutral to bearish strategy with the intention of collecting option premium. Maximum profit is the premium received for the sale of the call option. Maximum loss can be unlimited. Selling naked options may require special approval from your broker.