However, the actual loss may exceed the royalty, which usually occurs when the price of the underlying asset is higher than the exercise price. When the sold call option expires, the market price of the underlying asset is higher than the exercise price of the call option, and the buyer may choose to exercise to buy the underlying asset and sell it immediately to make a profit.
In this case, the seller needs to exercise the right, that is, sell the underlying assets at the exercise price. Since the market price is higher than the exercise price, the seller may need to buy the underlying assets at a higher price, resulting in losses. The amount of this loss may exceed the royalty obtained by selling the option.
Therefore, although the biggest loss of selling call options is the premium, in practice, the loss may exceed the premium due to the rise of the underlying asset price. This is one of the risks that sellers need to manage carefully in option trading. In order to avoid potential risks, the seller may need to adopt appropriate risk management strategies, such as setting a clear stop loss position or combining other hedging means.