Explore Your Options by Tom Gentile
BUYING VS. SELLING
What’s 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.