• Call Option Trading Strategy

    For a call option, Call option buyer earns profit if the share price goes higher than the strike price. If the share price stays below the strike price, then the call option buyer looses the premium paid for the call option. Call option buyer buys a call option when he is sure that the share price is going to move higher than the strike price and tries to make profit out of the same.

    At the same time, Call option seller earns the premium as profit if the share price stays/moves below the strike price. But he looses money if the share price goes higher than the strike price and the call option buyer exercises the call option. Call option seller sells a call option when he is sure that the share price is unlikely to move higher than the strike price and tries of make profit from the call option premium by betting on the same.

    The below table shows the payout for “Buy Call” and “Sell Call” options with the movement of share price. Here Strike Price (X) = USD 100 and Premium paid for Call Option is USD 5.

    The below Diagram shows the payout for “Buy Call” and “Sell Call” options with the movement of share price.

    Call Option Diagram

    Breakeven Price at Strike Price + Premium Paid = (100+5) USD = 105 USD. This is shown in the above diagram.

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