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<p>[QUOTE=&quot;calcol, post: 3646403, member: 77639&quot;]In the first example (sell call at $1500/ounce strike price), you sold for $15K, as the buyer of the call would have exercised it at $1600/ounce.&nbsp; So you have traded your 10 ounces of gold for $15K plus $330 received for selling the call. </p><p><br /></p><p>In the second example, the call strike price was $1550/ounce when market was $1500/ounce, and the call sold for $150.&nbsp; If price goes to $1600/ounce, the call will be exercised.&nbsp; So yes, as stated, you would have traded the 10 ounces of gold for $15,650.</p><p><br /></p><p>No one should sell a call unless they are OK with giving-up the underlying security or commodity at the call price regardless of how high it might go before the option expires.&nbsp; Retaining the gold (same as repurchasing) if the call is exercised at a higher price is essentially a bet that the price will go even higher.&nbsp; The bet is financed by proceeds of the sale plus additional cash, either outright (you pay-off the negative balance in the option account) or borrowed (you carry a negative balance in the option account).</p><p><br /></p><p>When it comes to commodities, which gold is,&nbsp; futures (i.e. options) make the most sense for producers and consumers of the commodity.&nbsp; A gold mine or refinery might sell calls to obtain cash to finance current operations.&nbsp; Presumably the strike price will be at more than break-even for them, and the expiry term will be long enough that they can pay off the call with product if needed.&nbsp; A consumer of gold, like a mint or jeweler, might buy calls to insure a ceiling price they must pay for their raw material.&nbsp; If the market price goes down, they ignore the option and buy at the lower price.&nbsp; If the market price goes up, they are supplied with raw material at the strike price.</p><p><br /></p><p>Cal[/QUOTE]</p><p><br /></p>

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