The seller of a call option makes the most profit when the option

Question

Quizplus · Accepted Answer

The seller of a call option receives the premium upfront and wants to keep it as profit. If the option is exercised immediately or converted into shares, the seller will have to sell the underlying asset at the strike price, which may not be as profitable as keeping the premium. If the option is in the money or exercised at expiration, the seller may have to sell the asset at a lower price than the current market value, resulting in a loss. Therefore, the seller makes the most profit when the option expires without being exercised.

The Seller of a Call Option Makes the Most Profit