How Does Selling a Call Option Generate Income for the Investor?
Selling (writing) a call option generates immediate income for the investor in the form of the option premium. The buyer pays this premium for the right to buy the underlying asset at the strike price.
This premium is kept by the seller regardless of whether the option is ultimately exercised or expires worthless.
Glossar
Selling a Call Option
Covered Call Initiation ⎊ The action of selling a call option contract against an underlying asset that is already held in the portfolio, generating immediate premium income while simultaneously capping the potential upside appreciation of the asset.
Call Option
Entitlement ⎊ The core of a call option within cryptocurrency derivatives represents a contractual right, but not an obligation, to purchase a specified digital asset at a predetermined price, known as the strike price, on or before a specific expiration date.
Immediate Income
Flow ⎊ This refers to the rapid realization of cash or liquid assets generated from short-term trading activities or the collection of option premiums.