A long option (long call or long put) which is held by an investor and is subject to a short call held by the writer of the long option. This option allows the writer to limit the option buyer’s profit by activating an embedded call feature so as the position is closed out during its life. For example, if a particular long call is currently going deeper in the money, the writer can exercise “callability right” and terminate the position at once in order to stop the accumulation of any further losses.
December 16, 2024
