Explore Your Options  |  JUL 2004

Explore Your Options by Tom Gentile

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.

by Tom Gentile