Trading Education Guides Options Trading
- By Mike Bolin
- Updated April 9, 2024
8 min read
- Reviewed by Angelica Rieder
- Fact checked by Lucien Bechard
SHARE THIS ARTICLE
When you sell a call option, you’re bearish. You sell the call short and want it to drop in value. You keep the premium (money). It is the opposite strategy of buying a long put, where you still want the price to drop. However, when you sell a call, you make money if the stock moves sideways or drops. So you’re making money in two directions versus when you buy a put, you NEED the stock to drop. You lose money if the stock trades sideways when you’re long a put option. See how selling is better?
Options Trading Course
In this course, you'll learn how to buy and sell options, options assignment, vertical spreads, the most popular strategies, and how to prepare for live trading action.
View Course
Table of Contents
- Sell a Call Introduction
- Two Types
- Basics
- How to Sell a Call Example
- Reasoning Behind Selling Options
- What to Look for When Selling Calls
- Risk Is On
- Final Thoughts: Sell a Call
- Frequently Asked Questions
Sell a Call Introduction
You are selling the call (you’re short, the buyer is long) to the buyer of an option because you believe the stock price will fall, while the buyer believes it is going up. The trading odds are in your favor as a seller. However, there’s unlimited risk in being a naked seller. The safest way to be an options seller is with spreads.
Do you know how to sell a call? There are different strategies available to you. How does selling a call benefit you? You can watch the video above to learn more. The stock market is a battleground between sellers and buyers. As a result, it trades in cycles. Hence, it’s important to learn how to sell call options and other money-making techniques outside of buying straight calls and puts.
To sell a call means you give someone else the right but not the obligation to buy the contract from you at a certain price within a certain date.
Two Types
If you’re trading options, you’re trading two types. They’re known as calls and puts. Beginner options traders tend to be most familiar with buying them “long.” You may be nodding along if you’re a new trader. So I’ll ask you, “Do you know how to sell a call spread?” You should…
Let’s talk about options before we get into how to sell a call. Options give you the right but not the obligation to buy or sell a stock at a certain price within a set time frame. Options are wasting assets because they expire at a specific date in the future, and the time value of that option is built into the contract’s price.
One option contract controls 100 shares. As a result, trading options tend to be cheaper because you’re not buying 100 shares outright. However, you can use options to do just that if you want.
Manytrading services offer options because they’re unique and have many strategies. In this post, we will talk about how to sell a call. Selling calls is unique and a great way to make a profit. Call spreads are one of the ways we like to swing tradebecause of the higher probability of a successful trade versus BUYING a call.
Basics
No matter whether you’re just beginning to learn stock market trading or you’re an old pro, we’re all familiar with buying calls. It’s the most simple form of options trading.
However, the more you learn, the more you realize that options are more complex. The different moving parts affect your profit and loss potential.
Don’t let that overwhelm you, however. Ouroptions trading course was created to help you learn the ins and outs of options trading. There, you’ll learn about the Greeks, open interest, and implied volatility,to name a few things.
You may be wondering what all that has to do with wanting to sell a call. Did you know that 80% of options expire worthless? Selling a call is taking advantage of those worthless options and giving you some powerful statistical odds that you’ll make money.
In short, when you sell, you hope it expires worthless so you can pocket the premiums. The premium is what the buyer pays.
How to Sell a Call Example
This is an example of selling call options in the ThinkorSwim platform.
Reasoning Behind Selling Options
A call option is taking the bullish side of a trade. However, when you sell a call, you hope the opposite will happen. You’re a big ol bear who wants the stock to drop in value. Good for you! Bears need love, too.
In other words, selling a call means you’re bearish on the stock. For example, you believe stock ABCD stock is going to fall. As a result, you decide to sell a call in the hopes someone believes it will go up. One of you is right, but both of you think you’re right….think about that irony for a minute…
So, once the trade is placed, you need the stock price to fall. If it did, you’d get to keep the premium, and it expired worthless. If the buyer paid $345 for a call and the price fell, you’d get to keep the $345. Nice huh?
In essence, the practice of selling a call is taking the opposite bias.
COMPANY | ![]() | ![]() | ![]() |
---|---|---|---|
DESCRIPTION | Experience TradeStation's professional-grade options trading platform, built for serious traders seeking value and power | ThinkorSwim is for more advanced options traders. It features elite tools and lets you monitor the market, plan your strategy, and implement it in one convenient, easy-to-use, integrated place | Trade options on stocks, ETFs, and broad-based indices. Trade equity and ETF options online for $1.00 per contract opening commission and $0 commission to close, capped at $10.00 per leg |
HIGHLIGHTS | Solid overall trading platform • Ease of use • Reliable • Great customer service • Low commissions Learn | Top charting platform • Customizable scanners and indicators • Easy order entry • Reliable • Great customer service • Low commissions Learn | Award-winning platform • Great customer service • Order chains • Low commissions • Liquidity rating indicator • Curated watchlists Read |
What to Look for When Selling Calls
When you go to sell, we’ve established that you’re looking for the stock to fall. How can you be comfortable in making that trade?
You will want to look at candlesticks, patterns, support,and resistance. All of these can help you make smartertrades.
It’s important to remember that not every trade will work 100% of the time. Even the best traders fail 30-40% of the time. As a result, even when you sell a call, you can lose.
Selling a call can be quite risky. However, if done right, it’s also very lucrative.
Before selling options, you have to ensure the charts give that signal. It would be best if you were on the right side of the trade while someone else is not.
Risk Is On
- They’re very popular since options are a great way to make money without a large account. Their trading allows you to make money no matter what the market is doing.
- However, when you sell a call, you must sell your stock shares to the buyer at whatever strike price you agreed upon. That means if the price went up instead of down, the buyer gets cheaper shares, and you’re out.
- You often plan a trade, and your options chain may show you your risk vs. reward. You’ll find that the you’ll sell options greatly outweighs the reward.
- However, don’t let that deter you from selling. Have a goal in mind. Once you reach that goal, close out the trade. If the trade goes against you, get out of it as soon as possible to protect yourself.
- Since most stock options expire worthless, advanced traders have used selling options as a profitable trading strategy.
Best Trading Tools
The Bullish Bears Team created a list of the best trading tools. Our reviews give detailed breakdowns of the positives and negatives of scanners, charting software, journaling, and simulators.
View List
Final Thoughts: Sell a Call
Since the strategy to sell a call is risky, practice. Open a simulated account. We’re fans ofThinkorSwim. With apaper tradingaccount, you can see how the moving parts of options work.
Practice taking the bearish bias by going to sell a call. What patterns work the best? How profitable is it? Would you be comfortable taking the risk?
These are all questions you can answer by practicing in a simulated account. That way, you’re not risking your money. You always want to place many practice trades before using real money.
When you sell a call, you take a bearish bias on the stock. Smart stock market trading is all about minimizing risk. Make sure you’ve looked at the charts and have a good indication that a stock is going bearish.
Frequently Asked Questions
How Much Can You Lose If You Sell a Call?
The maximum loss is unlimited if you sell a call. There is no ceiling price on how high a stock can go. When selling puts, the price of a stock could theoretically drop to zero.
Is Selling a Call Bullish or Bearish?
Selling a call is bearish because the seller of the option profits if the shares don't increase. Buying a call option is bullish because the buyer profits if the stock increases.
Is Selling Calls a Good Strategy?
Selling calls naked can be a very good strategy, but it is also risky because the losses can be drastic. A popular alternative would be selling covered calls.
Related Articles
Options Trading Levels
April 18, 2024
What are options trading levels? Brokers implement levels on new trading accounts to protect new traders. Options allow you to trade big-name stocks with less
Read More »
Options Put Call Ratio Meaning
November 16, 2023
Options traders and those frequently observing the markets often speak about the Put-Call ratio. Although you might be able to determine what it means by
Read More »
Option Flow Data Explained
November 10, 2023
Are you an options trader or looking to get into trading options? Options can be overwhelming and seem over-complicated to those just starting. One tool
Read More »
IV Rank Options Strategy
September 26, 2023
IV Rank is something that can help find big market moves. As a result, we have some custom indicators you can use in TOS to
Read More »
What Are 0DTE Options When Trading?
June 5, 2023
Nowadays, everyone on social media seems to be talking about 0DTE Options. To most investors, options are an advanced trading strategy that requires risk and
Read More »
Options Trading
Options Trading Levels
Read More »
Bullish Bears April 18, 2024
Options Trading
Options Put Call Ratio Meaning
Read More »
Mike Sakuraba April 8, 2024
Options Trading
Option Flow Data Explained
Read More »
Mike Sakuraba April 6, 2024
Options Trading
IV Rank Options Strategy
Read More »
Angelica Rieder April 6, 2024
STOCK TRADING SERVICE
Our chat rooms willprovide you with an opportunity to learn how to trade stocks, options, and futures. You’ll see how other members are doing it, share charts, share ideas and gain knowledge.
Our traders support each other with knowledge and feedback. People come here to learn, hang out, practice, trade stocks, and more. Our trade rooms are a great place to get live group mentoring and training.
TRADE ALERTS “SIGNALS”
The Bullish Bears trade alerts include both day trade and swing trade alert signals. These are stocks that we post daily in our Discord for our community members.
These alert signals go along with our stock watch lists. Our watch lists and alert signals are great for your trading education and learning experience.
We want you to see what we see and begin to spot trade setups yourself.
REAL-TIME STOCK ALERTS SERVICE
We also offer real-time stock alerts for those that want to follow our options trades. You have the option to trade stocks instead of going the options trading route if you wish.
Our stock alerts are simple to follow and easy to implement. We post entries and exits.
Also, we provide you with free options courses that teach you how to implement our trades as well.
STOCK TRAINING DOESN’T NEED TO BE HARD
Stock training doesn’t need to be hard. But it sure feels hard when you don’t know where to turn for legitimate knowledge. There are tons of places to learn, but what makes us different?
Well, for starters, we’re just real everyday people who like trade stocks. We’re not gurus portraying a fancy lifestyle of cars and jets and beaches. Can you obtain those things with what we teach you? Sure you can. Is that what motivates us when teaching you how to trade?
Nope. What we really care about is helping you, and seeing you succeed as a trader. We want the everyday person to get the kind of training in the stock market we would have wanted when we started out.
WHY WE’RE DIFFERENT
What else makes us different? When it comes to the stock market, we’ve won, we’ve lost, we’ve lived, and learned. We’ve been through the ups and downs in the market and figured out what really matters. The Charts…Candlesticks = PRICE ACTION! We’ve created a site that passes all this knowledge on to you.
We don’t charge you an arm and a leg for the stock training we give you. We charge a modest amount that goes towards running our day-to-day operations and paying for our invaluable team moderators that are passionate about teaching YOU!
That’s about it. We could charge more, but we have a pay it forward, give back mentality. It’s not about the money. The best and most important thing for us is YOU. We want to feel good about what we do, and the results and reviews speak for themselves.
Those emails we get, the feedback, the success we see. That is what our educational trading community is all about. We hold no secrets back. Our trading edge is your trading edge.
STOCK TRAINING DONE RIGHT
We don’t care what your motivation is to get training in the stock market. If it’s money and wealth for material things, money to travel and build memories, or paying for your child’s education, it’s all good. We know that you’ll walk away from a stronger, more confident, and street-wise trader.
In our stock trading community, you’re going to get it all. Futures, options trading, and stocks. Not just penny stocks either. Small, mid, and large caps. Each day we have several live streamers showing you the ropes, and talking the community though the action.
There’s no catch, no smoke or mirrors. What you see is what you get. If you’re looking to change your life, or someone else’s, we’re here to help you reach that goal. Get started learning day trading, swing trading, options, or futures trading today!
Click Hereto start your 7-day free trial.
TRADING STOCKS IN THE BULLISH BEARS COMMUNITY
Yes, we work hard every day to teach day trading, swing trading, options futures, scalping, and all that fun trading stuff. But we also like to teach you what’s beneath the Foundation of the stock market.
Tell you the TRUTH about how the market works. The importance of controlling your emotions and having a proper mindset when trading. We’re really passionate about teaching you this stuff!
Money isn’t our #1 priority in life. YOU are. Our members come first. Making sure you get comfortable with trading is our priority.
We have members that come from all walks of life and from all over the world. We love the diversity of people, just like we like diversity in trading styles. It creates an environment much like a university or college.
TRADING ROOMS AND LIVE STOCK TRAINING
Each day our team does live streaming where we focus on real-time group mentoring, coaching, and stock training. We teach day trading stocks, options or futures, as well as swing trading. Our live streams are a great way to learn in a real-world environment, without the pressure and noise of trying to do it all yourself or listening to “Talking Heads” on social media or tv.
We will help to challenge your ideas, skills, and perceptions of the stock market. You will learn and grow as a trader. Every day people join our community and we welcome them with open arms. We are much more than just a place to learn how to trade stocks.
Feel free to ask questions of other members of our trading community. The Bullish Bears are a very helpful crew. We realize that everyone was once a new trader and needs help along the way on their trading journey and that’s what we’re here for. To give you a hand up along your trading journey.
Click Hereto try our trading community free for 7 days.
FREE ONLINE TRADING COURSES
If you’ve looked for trading education elsewhere then you’ll notice that it can be very costly.
We are opposed to charging ridiculous amounts to access experience and quality information.
That being said, our website is a great resource for traders or investors of all levels to learn about day trading stocks, futures, and options. Swing trading too!
On our site, you will find thousands of dollars worth of free online trading courses, tutorials, and reviews.
We put all of the tools available to traders to the test and give you first-hand experience in stock trading you won’t find elsewhere.
Our content is packed with the essential knowledge that’s needed to help you to become a successful trader.
It’s important to treat day trading stocks, options, futures, and swing trading like you would with getting a professional degree, a new trade, or starting any new career.
Invest the proper time into your Trading Education and don’t try to run before you learn to crawl. Trading stocks is not a get-rich-quick scheme. It’s not gambling either, though there are people who treat it this way. Don’t be that person!
STOCK TRADING COURSES FOR BEGINNERS
The Bullish Bears team focuses on keeping things as simple as possible in our online trading courses and chat rooms. We provide our members with courses of all different trading levels and topics.
If you’re a beginner, intermediate level, or looking for expert trading knowledge…we’ve got you covered.
We have a basic stock trading course, swing trading course, 2 day trading courses, 2 options courses, 2 candlesticks courses, and broker courses to help you get started. Free.
Just choose the course level that you’re most interested in and get started on the right path now. Become a leader, not a follower. When you’re ready you can join our chat rooms and access our Next Level training library. No rush. We’re here to help.
Click Hereto take our free courses.