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What Is a Written Call Option? How It Works and Risks
What Does It Mean to Write a Call Option?
To write a call option is to sell someone the right, but not the obligation, to buy an underlying asset from you at a set price, called the strike price, by the option’s expiration date. You receive a premium upfront; in return, you take on the obligation to sell the asset at the strike price if the option is exercised, even if its market price has risen much higher.
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What Are the Trade-Offs?
Call writing can bring in premium income when you expect a stock to stay near its current price or rise only modestly, but a covered call limits how much you gain if the stock climbs above the strike price. The premium does not eliminate your risk if shares fall, and writing an uncovered, or “naked,” call without owning the shares can expose you to potentially unlimited losses as the stock price rises.
Is This the Same as Writing a Call to Action?
No: a call option is a financial contract, while a call to action is copy that asks a reader to take a step, such as signing up or making a purchase. If you meant marketing copy, our guide to writing a call to action is the relevant article, and our featured product is How to Write a Call-to-Action That Actually Works | Actionable CTA Copywriting Ebook Guide for Marketers & Creators.
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FAQ
What does it mean to write call options?
It means selling call contracts and collecting premiums in exchange for taking on the obligation to sell the underlying asset at the strike price if the options are exercised. Whether you already own the asset determines whether the calls are covered or uncovered, a distinction that substantially changes your risk.
Is call writing bullish or bearish?
A covered call generally fits a neutral to moderately bullish outlook: you collect a premium but give up some potential upside above the strike price. Selling an uncovered call reflects a different, often neutral-to-bearish expectation, but it carries much greater risk if the asset’s price surges.
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