• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Epsilon Options

Options Trading Education

  • Home
  • How Options Work
    • In The Money (ITM) Options
    • Puts and Calls Explained
    • Learn Options Trading
    • LEAP Options Explained
    • Put Call Parity
    • Buy to Open vs Buy to Close
    • Out Of The Money (OTM) Options
    • Strike (Exercise) Price
    • Implied Volatility
    • Volatility Skewness | IV Skew In Options
  • Options Greeks
    • Delta
    • Vega
    • Gamma
    • Theta
    • Rho
  • Options Spreads
    • Long Call
    • Long Put
    • Bear Put Spread
    • Iron Condor
    • Bull Call Spread
    • Covered Calls
    • Synthetic Covered Call
    • Buying Straddles Into Earnings
    • Covered Call LEAPs
    • Calendar Spread | A Key Non-Directional Options Strategy
    • Backspread
    • Strangle
    • Butterfly
    • Protective Put
    • Long Box Spread
    • Straddle
    • Vertical Spread
    • Zero Cost Collar
  • Options Brokers Reviews
  • Blog
  • Show Search
Hide Search

Can You Sell A Call Option Before It Hits The Strike Price?

epsiladmin · Dec 18, 2020 ·

We’re starting a series of posts on common questions options traders, particularly beginners, have. So here’s the first one:

Question To Be Answered: Can You Sell A Call Option Before It Hits The Strike Price?

The short answer is, yes, you can. Options are tradeable and you can sell them anytime. Even if you don’t own them in the first place (see below).

The longer answer depends on whether you do own the option. And whether the call option is in the money (ITM) or out of the money (OTM) at present (ie in which direction is it likely to ‘hit’?).

It also would be more useful to answer the related question on desirability: is it a good idea?

Scenario 1: You Own An OTM Option

Let’s say you own a call option with a strike price of 120 and the stock price is $100. In other words, it is $20 out of the money. And there are 20 days before expiry (say).

An OTM option before expiry will have intrinsic value. It will still have a value which can be sold in the market.

This is better than the alternative of exercising the option: you’d receive stock for which you’d pay $120/share, not recommended when stock is available at $100 on the open market.

The key decision on whether to sell or hold depends on whether you believe the stock is going to move up sufficiently within the next 20 days to counter the effect of time decay.

Long options positions naturally reduce in value, all other things being equal, as they are theta positive.

Scenario 2: You Own An ITM Option

Let’s say you own a call option with a strike price of 80 and the stock price is $100. In other words, it is $20 in the money. And there are 20 days before expiry (say).

In this case the option will have both extrinsic value of $20 (the difference between the strike and stock prices) plus intrinsic value due to there still being 20 days remaining on the options contract.

As above this intrinsic value will fall over time, all things being equal, and so again you should only sell if you believe the stock will not rise to counteract this eventual loss in intrinsic value due to time decay.

Scenario 3: You Don’t Own The Call Option

Options traders can actually sell options that they don’t own – called writing an option.

This can be lucrative: both ITM and OTM options have intrinsic value which falls over time. Hence if the option expires OTM it will be worth it, and the premium ‘sold’ is kept as profit.

It is also risky: should a call option expire ITM it will be exercised and the option holder is entitled to purchase stock from you at the lower strike price (compared to the current stock price).

However many stock holders do sell call options against their portfolios, receiving additional income from the sold option premiums, at the risk of having their stock ‘called away’ (in other being forced to sell to the call option holder if it expires ITM). This is the covered call option strategy.

In summary then it is almost always possible to sell a call option before it hits the strike price. The more pertinent question is whether it is desirable to do so.

Uncategorized

Primary Sidebar

Other Posts:

Calendar Spread | A Key Non-Directional Options Strategy

calendar spread

Gamma Scalping Options Trading Strategy: A Concise Guide for Traders

options gamma scalping explained

Bearish Options Strategies | Profit From Stock Downturns

bearish options strategies

The Long Box Spread Options Strategy | Risk Free ‘Arbitrage’

long box spread options strategy

Sell to Open vs Sell to Close

Sell To Open Vs Sell To Close

Extrinsic Value In Options Trading

Extrinsic Value In Options Trading

Copyright © 2025 · Monochrome Pro on Genesis Framework · WordPress · Log in

  • Facebook
  • Twitter
  • Pinterest
  • Privacy Policy