Short Call


Sell a Call Option

Margin Requirement

Yes, must post variable margin similar to futures in a rising market


  • Raises the selling price in a stable market
  • Some downside protection
  • Flexible, offset at any time


  • Can’t benefit from higher futures price
  • Downside protection is limited to the premium sold
  • Offsetting before expiration will change the cost & P/L (potential increased cost to buy back in a rising market)
  • Capital expense of potential margin exposure

When to Apply

  • In a stable market environment or when risk to both higher and lower prices perceived to be limited
  • If strike price of short call option represents a target sale price that fits into budget or operating margin
  • In a high implied volatility environment historically and/or seasonally

Potential Adjustment

  • In a rising market, roll up call option to higher strike price to extend range of opportunity to benefit from rising prices
  • In a falling market, buy back call option to capture decay in premium, and/or roll down short call option to generate additional credit