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So, I understand that if I write a call option and someone decides to exercise it before it expires, I agree to sell them the stock for the listed price on the option.

I guess my confusion is, if I buy a call option from someone else and then sell it to another person before it expires and they then choose to exercise it: I do not have to sell the stock because I did not actually write the option.

In other words, the person at risk of selling the stock is the original writer of the option, and not any of the people who owned the option from the day it was written to exercise. Is this correct?

Bob Baerker
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Senju
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2 Answers2

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You're correct. If you have no option position at execution then you carry no risk.

Your risk is only based on the net number of options you're holding at execution. This is handled by your broker or clearinghouse.

Pretend that you wrote 1000 options, (you're short the call) then you bought 1000 of the same option (bought to cover) ... you are now flat and have zero options exposure.

Pretend you bought 1000 options (you're long the calls) then you sold 1000 of them (liquidated your long) ... you are now flat and have zero options exposure.

Matthew
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If you sold bought a call option then as you stated sold it to someone else what you are doing is selling the call you bought. That leaves you with no position. This is the case if you are talking about the same strike, same expiration.

PRIA Group
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