How Does the Exercise of This ITM Call Option Impact the Option Seller?
The seller (writer) of the ITM Call option is obligated to sell the underlying asset (Bitcoin) to the buyer at the strike price ($42,000). Since the market price is $45,000, the seller incurs a loss of $3,000 per contract (plus or minus the premium received).
If the seller was “naked” (did not own the BTC), they must buy BTC at the market price and sell it at the strike price, realizing the loss.
Glossar
Call Option
Upside ⎊ Acquiring a Call Option provides leveraged upside participation in the appreciation of a specific cryptocurrency asset.
ITM Call Option
Premium ⎊ An ITM Call Option, within cryptocurrency derivatives, signifies a contract where the strike price is below the current market price of the underlying asset, resulting in an intrinsic value component alongside the time value premium.
ITM Call Option Impact
Value ⎊ The primary impact of an In-The-Money (ITM) Call Option is its positive intrinsic value, representing the immediate profit realized if the option were exercised instantly.