Chapter 7: Selling options: the scenarios
In this chapter we are going to move from buying options to selling options. Many people have more difficulty in understanding selling options as the process involves selling first and then buying later to close the position. As options are an intangible asset, not a physical asset, selling them is not as complicated as you might believe.
Selling options
When you buy an option, you are buying the right to buy or sell 100 shares of the underlying stock at the strike price, any time before the option expires. Therefore, it follows that an option seller, or option writer, is granting the right to buy or sell 100 shares of the underlying stock at the strike price, any time before the option expires. As ...
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