Naked(Short) Call

NAKED CALL
A naked call is an options strategy in which an investor writes (sells) call opti
market without owning the underlying security. This stands in contrast to a
where the investor owns the underlying security on which the call options a
The strategy consists of writing the call in hopes that it will lose value throug
and eventually expire out-of-the-money.

Price ₹ 358.00 ₹ 358.50 ₹ 360.00 ₹ 360.20 ₹ 360.80 ₹ 362.00 ₹ 363.50 ₹ 365.00

Strick Pric ₹ 360.50 ₹ 360.50 ₹ 360.50 ₹ 360.50 ₹ 360.50 ₹ 360.50 ₹ 360.50 ₹ 360.50
Gain/share 0 0 0 0 -0.3 -1.5 -3 -4.5
Gain ₹ 0.00 ₹ 0.00 ₹ 0.00 ₹ 0.00 -₹ 30.00 -₹ 150.00 -₹ 300.00 -₹ 450.00
Profit ₹ 100.00 ₹ 100.00 ₹ 100.00 ₹ 100.00 ₹ 0.00 -₹ 50.00 -₹ 200.00 -₹ 350.00
Premium(i 100 100 100 100 0 -50 -200 -350

For each scenario at 360.5 and below the contract

will be worthless therefore I will
collect a hundred percent of the premium
and that is 100 per contract.(Limited Gain)
 Transactio Strick pric Last Price or Premium
an investor writes (sells) call option on the open
urity. This stands in contrast to a cover call strategy,
Short the 360.5 100
curity on which the call options are written.
opes that it will lose value through time decay
Underline Tata Motors Pvt Ltd

BREAKEVEN
The breakeven point for a naked call option
₹ 366.00 That gives the options seller a little leeway.
₹ 360.50 Breakeven= Strick price+ Premium
-5.5
-₹ 550.00
-₹ 450.00
-450
HOW IT WORKS
If the price of the stock rises above the str
the contract Strikes which are above than 360.5 since I do not of the options can demand the seller to de
own the shares I will have to buy the underlying The options seller will then have to go into
mium stock at the market price and the market price to sell them to the optio
Gain) then sell to the contract owner on strick price.In
resultant if "stop loss" is not in contract than loss
will be unlimited.
N
ven point for a naked call option is the strike price plus the premium.
he options seller a little leeway.
= Strick price+ Premium

WORKS
e of the stock rises above the strike price by the options expiration date then the buyer
tions can demand the seller to deliver shares of the underlying stock.
ns seller will then have to go into the open market and buy those shares at
et price to sell them to the options buyer at the options strike price.
 Long Calender spread Call
TransactionStick Price Collection Volatility Premium Paid Break even= Strick pric
Sell the Apr$ 158.00 $ 340.00 10% $ 5.00 Break even
Buy the Ma$ 158.00 $ 640.00 14.67% $ 2.00 Break even
Net Worth (Debit) $ 300.00
Underline IBM shares

Date spotPay
price
off from Sell
Pay 1off
ITMfrom
Callbuy 1 OTMNet
Callpay off
14/04/18 150 $ 340.00 $ (640.00) $ (300.00)
16/04/18 152 $ 340.00 $ (640.00) $ (300.00)
18/04/18 156 $ 340.00 $ (640.00) $ (300.00)
19/04/18 157 $ 340.00 $ (640.00) $ (300.00)
20/04/18 156 $ 340.00 $ (440.00) $ (100.00)
21/04/18 160 $ 140.00 $ 40.00 $ 180.00
23/04/18 161 $ (40.00) $ 60.00 $ 20.00
25/04/18 160 $ (140.00) $ 80.00 $ (60.00)
26/04/18 161 $ (240.00) $ 100.00 $ (140.00) (Last thus of April)
30/04/18 162 Expired $ 120.00 $ 120.00
3/5/2018 163 Expired $ 140.00 $ 140.00
8/5/2018 163 Expired $ 160.00 $ 160.00
### 164 Expired $ 180.00 $ 180.00
16/05/201 165 Expired $ 200.00 $ 200.00
19/05/201 166 Expired $ 220.00 $ 220.00
23/05/201 167 Expired $ 240.00 $ 240.00
26/05/201 168 Expired $ 260.00 $ 260.00
29/05/201 169 Expired $ 280.00 $ 280.00
30/05/201 170 Expired $ 300.00 $ 300.00
31/05/201 171 Expired $ 320.00 $ 320.00 (Last thus of May)
Total Collecti $ 1,120.00

In this Example, I
taked two differant
options with has
differant "expiry
date".One will End
this month last
thusday and other
one end in
may(31st).
Break even= Strick price-premi
160
156

Long Calender Call

Short one call option and long a second call option with a more distant
expiration is an example of a long call calendar spread.The strategy most
commonly involves calls with the samestrike (horizontal spread), but can
also be done with different strikes (diagonal spread).
The investor hopes to reduce the cost of purchasing a longer-term call option.

Profit/Loss
During the life of the near-term option, the potential profit is limited to the
extent the near-term option declines in value more quickly than the longer-term
option. Once the near-term option has expired, the strategy becomes simply a long
call whose potential profit is unlimited. The potential loss is limited to the premium
paid to initiate the position.

Analysis
This strategy combines a longer-term bullish outlook with a near-term neutral/bearish outlook.
If the underlying stock remains steady or declines during the life of the near-term option,
that option will expire worthless and leave the investor owning the longer-term option free
and clear. If both options have the same strike price, the strategy will always require paying a
premium to initiate the position.
 In the money call Out of the money call
Buy 1050
Share Price Strike price premium Pay Off Strike price Premiuim Pay off
600 900 100 -100 1100 100 -100
700 900 100 -100 1100 100 -100
800 900 100 -100 1100 100 -100
880 900 100 -100 1100 100 -100
900 900 100 -100 1100 100 -100
950 900 100 -50 1100 100 -100
1000 900 100 0 1100 100 -100
1050 900 100 50 1100 100 -100
1100 900 100 100 1100 100 -100
1250 900 100 250 1100 100 50
1300 900 100 300 1100 100 100
1400 900 100 400 1100 100 200
1550 900 100 550 1100 100 350
1600 900 100 600 1100 100 400
1750 900 100 750 1100 100 550
1800 900 100 800 1100 100 600
1880 900 100 880 1100 100 680
1900 900 100 900 1100 100 700
2000 900 100 1000 1100 100 800
1950 900 100 950 1100 100 750
1940 900 100 940 1100 100 740
1900 900 100 900 1100 100 700
1850 900 100 850 1100 100 650
1800 900 100 800 1100 100 600
1780 900 100 780 1100 100 580
1750 900 100 750 1100 100 550
1700 900 100 700 1100 100 500

Share price Total ( Profit from call+ put)

600 300
700 100
800 -100
880 -260
900 -300
950 -300
1000 -300
1050 -300
1100 -300
1250 0 it is the break even point whn we apply both the strategy
1300 100
1400 300
Profit and loss
1550 600
1600 700 2500

1750 1000 2000

1800 1100
1880 1260 1500
1900 1300
1000
2000 1500
1950 1400 500
1940 1380
1900 1300 0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
1850 1200
-500
1800 1100
Sha re price Total ( Profit from
1780 1060
1750 1000
1700 900
 PUT Put
In the money call Out of the money
Buy 1050
P$ L from cStrike price Premium Pay off Strike price Premium Pay off Profit from Put
-200 1100 150 350 900 150 150 500
-200 1100 150 250 900 150 50 300
-200 1100 150 150 900 150 -50 100
-200 1100 150 70 900 150 -130 -60
-200 1100 150 50 900 150 -150 -100
-150 1100 150 0 900 150 -150 -150
-100 1100 150 -50 900 150 -150 -200
-50 1100 150 -100 900 150 -150 -250
0 1100 150 -150 900 150 -150 -300
300 1100 150 -150 900 150 -150 -300
400 1100 150 -150 900 150 -150 -300
600 1100 150 -150 900 150 -150 -300
900 1100 150 -150 900 150 -150 -300
1000 1100 150 -150 900 150 -150 -300
1300 1100 150 -150 900 150 -150 -300
1400 1100 150 -150 900 150 -150 -300
1560 1100 150 -150 900 150 -150 -300
1600 1100 150 -150 900 150 -150 -300
1800 1100 150 -150 900 150 -150 -300
1700 1100 150 -150 900 150 -150 -300
1680 1100 150 -150 900 150 -150 -300
1600 1100 150 -150 900 150 -150 -300
1500 1100 150 -150 900 150 -150 -300
1400 1100 150 -150 900 150 -150 -300
1360 1100 150 -150 900 150 -150 -300
1300 1100 150 -150 900 150 -150 -300
1200 1100 150 -150 900 150 -150 -300
 Solution:
Profit and loss
When we use call strategy we get the break even
point at price Rs. 1000 and when we use put
Strategy the break even point is at equilibirum price
of Rs.950 but when we use both the strategies
equilibrium price is more than as compared to both
the strategies that is Rs. 1250

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

rice Total ( Profit from cal l + put)

Total ( Profit from call+ put)
300
100
-100
-260
-300
-300
-300
-300
-300
0
100
300
600
700
1000
1100
1260
1300
1500
1400
1380
1300
1200
1100
1060
1000
900