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Strategy View
Investor is certain that the market will not rise and is unsure / unconcerned
whether it will fall.
Strategy Implementation
Call option is sold with a strike price of a.
Selling, or writing, calls requires a certainty about market bearishness.
If market bearishness is likely but you suspect short-term neutrality,
sell out-of-the-money options.
Upside Potential
Limited. The most you can profit is the premium received - received if
the market at expire is at, or below, the option strike.
Downside Risk
Unlimited. Losses on the position will worsen as the market rises. If the
investor likes the idea of the strategy, but not the downside risk, a
bear spread may work.
Margin
Always required.
Comment
If the market does little, and time passes, this helps as the short position
gains when the time value decays.
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