Clemen Langston: Understanding the Market Role of Option Sellers

Clemen Langston: Understanding the Market Role of Option Sellers

1. Obligor in the Option Contract
   • The seller is obligated to fulfill the contract's terms if the option buyer chooses to exercise the option. Specifically:

• For a call option, the seller is obligated to sell the underlying asset at the strike price when the buyer exercises the option.
• For a put option, the seller is obligated to buy the underlying asset at the strike price when the buyer exercises the option.

1. Income Generator
   • By selling options, the seller can immediately collect the option premium which is the primary source of income for the seller.
2. Risk Manager
   • Option sellers are typically experienced investors or institutions who use options as part of complex trading strategies to hedge risks or generate income.
3. Market Participant
   • Sellers provide liquidity in the options market, making it easier for buyers to trade options.