The basics of Options Seller
When you sell an options contract on Gotrade, you collect a premium upfront from the buyer. In exchange, you take on an obligation: if the buyer decides to exercise their right before the contract expires, you must fulfill it. If the buyer does not exercise their right, the contract expires and you keep the full premium.
How expiry works
Every options contract has an expiry date. Gotrade displays available expiry dates set by the exchange for example, 1 week, 1 month, or 3 months out. The longer the time to expiry, the larger the premium you receive, but also the more time for the market to move against you.
What are the risks of selling options?
Limited upside, uncapped downside: As a seller, your maximum profit is the premium received. Losses can be significantly larger if the market moves sharply against your position.
Assignment risk: If the buyer exercises their right, you are obligated to fulfill the contract, which means that, selling stock at the strike (covered call) or buying stock at the strike (cash-secured put) regardless of the current market price.
Market shock: Sudden news or events can move stock prices dramatically in a short time, far exceeding the protection offered by your premium.
Early assignment: American-style options can be exercised by the buyer at any time before expiry, not just at the expiry date.
What is the difference between a call and put option seller?
A call option seller gives the buyer the right to purchase a stock at the strike price. You profit when the stock stays below the strike. A put option seller gives the buyer the right to sell a stock at the strike price. You profit when the stock stays above the strike. Both strategies earn the premium as maximum profit, but face different loss scenarios based on price direction.
Why does Gotrade offer covered call and cash-secured put specifically?
These are the two most common defined-risk options selling strategies. Covered calls require you to already own the underlying stock. Cash-secured puts require you to hold enough cash to fulfill the obligation. Both strategies limit your risk compared to naked options selling, making them more suitable for retail investors on a mobile-first platform like Gotrade.
When does an options contract expire on Gotrade?
Expiry dates are set by the exchange and displayed in the Gotrade app when you set up your options contract. Available durations typically include weekly, monthly, and quarterly expirations. Contracts expire at market close on the expiry date. If not exercised, they expire worthless and you retain the full premium.
What happens mechanically when a buyer exercises their option?
The exchange's clearing system processes the assignment automatically:
For a call: you (the seller) must sell the stock at the strike price to the buyer.
For a put: you (the seller) must buy the stock at the strike price from the buyer.
The stock and cash are transferred through the broker system until the transaction is completed. On Gotrade, this process is handled automatically. You will see the position update reflected in your account.
Which is more profitable, selling calls or selling puts?
Neither is inherently more profitable. Profitability depends on market conditions and your analysis. Some traders prefer selling puts because markets tend to fall faster than they rise, making puts expire worthless more often in a stable or rising market. Others prefer covered calls for the steady income on stocks they already hold. In both cases, the strategy only works if it matches your view of the stock's direction.
Why was the options market created?
Options markets were created because investors wanted to trade not just the stock itself, but the right to buy or sell at a certain price in the future. This allows participants to hedge existing positions, generate income, or speculate on price direction with defined risk. Without options, you could only buy or sell the stock directly (spot market).