What Is the Maximum Loss Potential for a Short Call Option?
The maximum loss potential for a short call option is theoretically unlimited. Since the price of the underlying asset can rise indefinitely, the option writer (seller) is obligated to sell the asset at the strike price, regardless of how high the market price goes.
The loss is the difference between the market price and the strike price, minus the premium received, which can grow without limit.
Glossar
Loss Potential
Exposure ⎊ Loss Potential within cryptocurrency, options, and derivatives represents the maximum quantifiable decrement to capital given a defined probability of adverse price movement or counterparty default.
Short Call
Position ⎊ A Short Call represents a market position established by an options seller, or writer, who receives a premium in exchange for undertaking the obligation to sell the underlying cryptocurrency asset at the specified strike price.
Short Call Option
Premium ⎊ A short call option represents an obligation assumed by the seller to potentially deliver an underlying cryptocurrency asset at a predetermined strike price, receiving a premium as immediate compensation for this commitment.
Maximum Loss Potential
Exposure ⎊ Maximum Loss Potential, within cryptocurrency derivatives, represents the theoretical upper bound of capital at risk for a given position or portfolio, determined by the underlying asset’s price movement and the derivative’s structure.