Selling (writing) a call option
Get paid upfront for betting the market won't rise much — and why the risk is open-ended.
Flip to the other side
In the last lesson someone bought the NIFTY 22400 CE for ₹175. Someone also sold it to them. That seller is our subject now.
The call seller's view is: "NIFTY will not go much above 22,400 by expiry." They're happy if NIFTY falls, stays flat, or rises only a little.
It's a mirror image
Options are a zero-sum game between buyer and seller (before charges). Every rupee the buyer makes, the seller loses — and vice versa. So the seller's table is the buyer's table with the signs flipped:
| NIFTY at expiry | Buyer's P&L (1 lot) | Seller's P&L (1 lot) |
|---|---|---|
| 22,000 | −₹11,375 | +₹11,375 |
| 22,400 | −₹11,375 | +₹11,375 |
| 22,500 | −₹4,875 | +₹4,875 |
| 22,575 | ₹0 | ₹0 |
| 22,700 | +₹8,125 | −₹8,125 |
| 23,000 | +₹27,625 | −₹27,625 |
If NIFTY ends at 22,400, you make ₹11,375.
The shape is the bought call turned upside down: a flat roof where you keep all the premium, and a slope that keeps falling as NIFTY rises.
Why would anyone take that deal?
Look at the graph again. The seller wins in three of the four scenarios — NIFTY falls, stays flat, or rises a little (up to 22,575). The buyer only wins in one: a big enough rise.
Call buyer
- Needs a big move up, before expiry.
- Wins less often, but wins can be large.
- Risk is limited to premium.
Call seller
- Wins if NIFTY falls, stays flat or rises a little.
- Wins more often, but each win is capped.
- One bad rally can wipe out many small wins.
Time is also on the seller's side. Every day that passes without a big rally, the option loses some of its value (this is time decay, or ). The seller can buy it back cheaper and pocket the difference — without waiting for expiry.
Margin: the seller's security deposit
A buyer's risk is capped at the premium, so the buyer pays just that. A seller's risk is open-ended, so the exchange makes the broker collect — a security deposit blocked in your account. For one NIFTY lot this is typically over ₹1 lakh, and it changes with market conditions. Your broker's margin calculator shows the exact figure.
Quick check
You sold the 22400 CE at ₹175. Two days later it trades at ₹90. If you buy it back now, what's your profit for 1 lot?