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V. 22:7 (62): Explore Your Options by Tom Gentile
V. 22:7 (62): Explore Your Options by Tom Gentile
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Explore Your Options by Tom Gentile
BUYING VS. SELLING
Whats the difference between buying an option and selling one? Buyers of options have rights, and sellers have obligations. The buyer of a call has the right to buy the underlying security at an agreed-upon price (the strike price). The seller of the very same call has the obligation to the buyer to deliver shares of the underlying security if the buyer decides to exercise his rights. The same is true of puts, but in reverse. The buyer of a put has the right to sell a stock at an agreed price (called the strike price). The seller of that put has the obligation to purchase the shares, or have them put to him, in the event that the purchaser exercises his or her rights.
BUYING VS. SELLING
Whats the difference between buying an option and selling one? Buyers of options have rights, and sellers have obligations. The buyer of a call has the right to buy the underlying security at an agreed-upon price (the strike price). The seller of the very same call has the obligation to the buyer to deliver shares of the underlying security if the buyer decides to exercise his rights. The same is true of puts, but in reverse. The buyer of a put has the right to sell a stock at an agreed price (called the strike price). The seller of that put has the obligation to purchase the shares, or have them put to him, in the event that the purchaser exercises his or her rights.
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