An out of the money call option is when the trading price is below the strike price of the stock currently. Until the option is right near expiration there is still time value applied to these options given the chance the shares could rise and put these options into the money. By selling the options he is giving someone the right but not the obligation to purchase these shares at a given time for a given price. If at expiration the value of the shares do not reach the strike price the investor buying the call option would choose not to exercise since he could be the shares cheaper in the open market. Your friend would then keep the premium paid as additional income on his shares.
Simple Answer though not all that simple!
I own a stock
I decide to sell you the right to buy it at a certain price(fixed price) and this right will last for some time period after which it will expire and if you did not buy the stock for the fixed price you lose the money you paid me for the right.
I sold you the right because I wasn't making money on the stock and I set the price higher (strike pr) than the day I sold you the right so if you bought it I would make some profit.
If the price doesn't go up to/or past the strike price you will not buy the stock and I will keep the money I charged you for the right. Ergo, I made money on a stock that did not increase in value.
If the stock price goes over the strike price at any time while you hold the Call, you can exercise your right to buy my stock for the Strike price. Usually you want to buy it if the price goes higher than the strike so you will be getting the stock for a discount to its value.
The owner of the company(Jantzen) personally called me this afternoon to find out why I was so upset. He had been very busy and that was why he could not get back to me until this afternoon. He was very nice and professional. He took the time to listen to my concerns and promised to handle my case personally from this point on. He was able to send me some funding resources, which seems very promising. I have never had an owner of any company calling me to resolve my issues before. Jantzen takes pride in his work and business. As a small business owner, I understand it's not easy to handle it all and sometimes it's difficult to find the right people to work for you. I really appreciate him taking the time to work with me. I am confident that he will fulfill his promise to help me find the funding I need for my business. I let my emotions get the best of me and sent a negative review earlier out of anger. I am sorry Jantzen for that.
Sincerely,
Elizabeth Oppong
I have a friend who writes calls options for protection of his shares. He says when the option is below the strike price, which is where he bought shares at, the option is worthless and he gets the premium. Can someone explain this process in more depth.
