What happen in this selling call option scenario
"But what happen if the stock price went high and then go down near expiry date? When you hold a short (sold) call option position that has an underlying price that is increasing, what will happen (in general) is that your net margin requirements will increase day by day.  Thus, you will be required to put up more money as margin to finance your position.  Margin money is simply a ""good faith"" deposit held by your broker.  It is not money that is debited as cash from the accounting ledger of your trading account, but is held by your broker to cover any potential losses that may arise when you finally settle you position.   Conversely, when the underlying share price is decreasing, the net margin requirements will tend to decrease day by day.   (Net margin is the net of ""Initial Margin"" and ""Variation Margin"".) As the expiry date approaches, the ""time value"" component of the option price will be decreasing."
"It will be helpful to establish some definitions: Long ""Long"" is financial slang for ""to have possession of an asset"", legally, and ""to debit an asset"", financially.   Short ""Short"" is financial slang for ""to be liable for an asset"", legally, and ""to credit an asset"", financially. Option ""Option"" is financial slang for ""to have the right but not obligation to force the liable to perform action"", legally.  Without limits and when taken to absurdity, this can mean slavery.  For equities, this means ""to have the right but not the obligation to force the liable to buy/sell a specified asset at a specified price with a specified expiration for that right"" for a call/put, respectively. By the above, a call option is ""the right but not the obligation to force the liable to buy a specified asset at a specified price with a specified expiration for that right"". By the definition of ""long"" above, a call option is actually not long the underlying. By the definitions above and with a narrower scope applied to equities & indexes, to be ""long"" the call means ""to have the right but not the obligation to force the liable to buy a specified asset at a specified price with a specified expiration for that right"" while to be ""short"" the call means ""to have the obligation to be forced to sell a specified asset at a specified price with a specified expiration for that right"". So, to be ""long"" a call means to simply own the call." "As already noted, options contain inherent leverage (a multiplier on the profit or loss). The amount of ""leverage"" is dictated primarily by both the options strike relative to the current share price and the time remaining to expiration. Options are a far more difficult investment than stocks because they require that you are right on both the direction and the timing of the future price movement. With a stock, you could choose to buy and hold forever (Buffett style), and even if you are wrong for 5 years, your unrealized losses can suddenly become realized profits if the shares finally start to rise 6 years later. But with options, the profits and losses become very final very quickly. As a professional options trader, the single best piece of advice I can give to investors dabbling in options for the first time is to only purchase significantly ITM (in-the-money) options, for both calls and puts. Do a web search on ""in-the-money options"" to see what calls or puts qualify.  With ITM options, the leverage is still noticeably better than buying/selling the shares outright, but you have a much less chance of losing all your premium. Also, by being fairly deep in-the-money, you reduce the constant bleed in value as you wait for the expected move to happen (the market moves sideways more than people usually expect). Fairly- to deeply-ITM options are the ones that options market-makers like least to trade in, because they offer neither large nor ""easy"" premiums. And options market-makers make their living by selling options to retail investors and other people that want them like you, so connect the dots. By trading only ITM options until you become quite experienced, you are minimizing your chances of being the average sucker (all else equal). Some amateur options investors believe that similar benefits could be obtained by purchasing long-expiration options (like LEAPS for 1+ years) that are not ITM (like ATM or OTM options). The problem here is that your significant time value is bleeding away slowly every day you wait.  With an ITM option, your intrinsic value is not bleeding out at all. Only the relatively smaller time value of the option is at risk. Thus my recommendation to initially deal only in fairly- to deeply-ITM options with expirations of 1-4 months out, depending on how daring you wish to be with your move timing." "You may look into covered calls.  In short, selling the option instead of buying it ... playing the house.   One can do this on the ""buying side"" too, e.g. let's say you like company XYZ.  If you sell the put, and it goes up, you make money.  If XYZ goes down by expiration, you still made the money on the put, and now own the stock - the one you like, at a lower price.  Now, you can immediately sell calls on XYZ.  If it doesn't go up, you make money.  If it does goes up, you get called out, and you make even more money (probably selling the call a little above current price, or where it was ""put"" to you at). The greatest risk is very large declines, and so one needs to do some research on the company to see if they are decent -- e.g. have good earnings, not over-valued P/E, etc.  For larger declines, one has to sell the call further out.  Note there are now stocks that have weekly options as well as monthly options.  You just have to calculate the rate of return you will get, realizing that underneath the first put, you need enough money available should the stock be ""put"" to you.   An additional, associated strategy, is starting by selling the put at a higher than current market limit price.  Then, over a couple days, generally lowering the limit, if it isn't reached in the stock's fluctuation.  I.e. if the stock drops in the next few days, you might sell the put on a dip.   Same deal if the stock finally is ""put"" to you.  Then you can start by selling the call at a higher limit price, gradually bringing it down if you aren't successful -- i.e. the stock doesn't reach it on an upswing. My friend is highly successful with this strategy. Good luck" "Because this question seems like it will stick around, I will flesh out my comments into an actual answer. I apologize if this does not answer your question as-asked, but I believe these are the real issues at stake. For the actual questions you have asked, I have paraphrased and bolded below: Firstly, don't do a real estate transaction without talking to a lawyer at some stage [note: a real estate broker is not a lawyer]. Secondly, as with all transactions with family, get everything in writing. Feelings get hurt when someone mis-remembers a deal and wants the terms to change in the future. Being cold and calculated now, by detailing all money in and out, will save you from losing a brother in the future. ""Should my brother give me money as a down payment, and I finance the remainder with the bank?"" If the bank is not aware that this is what is happening, this is fraud. Calling something a 'gift' when really it's a payment for part ownership of 'your' house is fraud. There does not seem to be any debate here (though I am not a lawyer). If the bank is aware that this is what is happening, then you might be able to do this. However, it is unlikely that the bank will allow you to take out a mortgage on a house which you will not fully own. By given your brother a share in the future value in the house, the bank might not be able to foreclose on the whole house without fighting the brother on it. Therefore they would want him on the mortgage. The fact that he can't get another mortgage means (a) The banks may be unwilling to allow him to be involved at all, and (b) it becomes even more critical to not commit fraud! You are effectively tricking the bank into thinking that you have the money for a down payment, and also that your brother is not involved! Now, to the actual question at hand - which I answer only for use on other transactions that do not meet the pitfalls listed above: This is an incredibly difficult question - What happens to your relationship with your brother when the value of the house goes down, and he wants to sell, but you want to stay living there? What about when the market changes and one of you feels that you're getting a raw deal?  You don't know where the housing market will go. As an investment that's maybe acceptable (because risk forms some of the basis of returns). But with you getting to live there and with him taking only the risk, that risk is maybe unfairly on him. He may not think so today while he's optimistic, but what about tomorrow if the market crashes? Whatever the terms of the agreement are, get them in writing, and preferably get them looked at by a lawyer. Consider all scenarios, like what if one of you wants to sell, does the other have the right to delay, or buy you out. Or what if one if you wants to buy the other out? etc etc etc. There are too many clauses to enumerate here, which is why you need to get a lawyer." I do this often with shares that I own - mostly as a learning/experience-building exercise, since I don't own enough individual stocks to make me rich (and don't risk enough to make me broke). Suppose I own 1,000 shares of X.  I don't expect my shares to go down, but I want to be compensated in case they do go down.  Sure, I could put in a stop-loss order, but another option is to sell a call above where the stock is now (out-of-the-money).   So I get the premium regardless of what happens.  From there three things can happen: So a covered call essentially lets you give up some upside for some compensation against downward moves.  Mathematically it's roughly equivalent to selling a put option - you make a little money (from the premium) if the stock goes up but can lose a lot if the stock plummets. So you would sell call options if: A stock is only worth what someone is willing to pay for it. If it trades different values on different days, that means someone was willing to pay a higher price OR someone was willing to sell at a lower price.  There is no rule to prevent a stock from trading at $10 and then $100 the very next trade... or $1 the very next trade. (Though exchanges or regulators may halt trading, cancel trades, or impose limits on large price movements as they deem necessary, but this is beside the point I'm trying to illustrate). Asking what happens from the close of one day to the open of the next is like asking what happens from one trade to the next trade... someone simply decided to sell or pay a different price.  Nothing needs to have happened in between. Just so I'm clear- the end result is a long call, and you think the stock is going up. There is nothing wrong with that fundamentally.  Be aware though: That's a negative theta trade. This means if your stock doesn't increase in price during the remaining time to expiration of your call option, the option will lose some of its value every day. It may still lose some of its value every day, depending on how much the stock price increases. The value of the call option just goes down and down as it approaches maturity, even if the stock price stays about the same. Being long a call (or a put) is a tough way to make money in the options market.  I would suggest using an out-of-the-money butterfly spread. The potential returns are a bit less. However, this is a cheap positive theta trade so you avoid time decay on the value of the option. A bullish (or 'long') call spread is actually two separate option trades.  The A/B notation is, respectively, the strike price of each trade. The first 'leg' of the strategy, corresponding to B, is the sale of a call option at a strike price of B (in this case $165).  The proceeds from this sale, after transaction costs, are generally used to offset the cost of the second 'leg'. The second 'leg' of the strategy, corresponding to A, is the purchase of a call option at a strike price of A (in this case $145). Now, the important part: the payoff.  You can visualize it as so. This is where it gets a teeny bit math-y.  Below, P is the profit of the strategy, K1 is the strike price of the long call, K2 is the strike price of the short call, T1 is the premium paid for the long call option at the time of purchase, T2 is the premium received for the short call at the time of sale, and S is the current price of the stock.  For simplicity's sake, we will assume that your position quantity is a single option contract and transaction costs are zero (which they are not). P = (T2 - max(0, S - K2)) + (max(0, S - K1) - T1) Concretely, let's plug in the strikes of the strategy Nathan proposes, and current prices (which I pulled from the screen).  You have: P = (1.85 - max(0, 142.50 - 165)) - (max(0, 142.50 - 145)) = -$7.80 If the stock goes to $150, the payoff is -$2.80, which isn't quite break even -- but it may have been at the time he was speaking on TV. If the stock goes to $165, the payoff is $12.20. Please do not neglect the cost of the trades!  Trading options can be pretty expensive depending on the broker.  Had I done this trade (quantity 1) at many popular brokers, I still would've been net negative PnL even if NFLX went to >= $165.