Forum Archive Index - March 2004

["Baa Baa" <baa_baa@hotmail.com>]

No. You have initially 'bought to open' (a position) being a call option for 
the premium (price) you paid. You chose then to 'sell to close', and was 
paid the premium by the buyer. The initial WRITER of the option who 'Sold to 
open' is the one who holds the stocks required to fulfill the call option 
should it be exercised.


>From: Paul & Eunice <paul.c@paradise.net.nz>
>Reply-To: sharechat@sharechat.co.nz
>To: sharechat@sharechat.co.nz
>Subject: [sharechat] Option trading
>Date: Mon, 22 Mar 2004 17:21:38 +1200
>
>I have been doing a bit of reading about the use of options as an 
>alternative to buying the underlying stock. However, I can't find anywhere 
>the answer to the following question.
>
>If I decide to directly sell a call option (after I have initially bought 
>the option on the market) before the expiration date (and not purchase the 
>underlying stock), am I then required to purchase and deliver the 
>underlying stock to the person who has bought my call option if they decide 
>to exercise the call (before the expiration date)?
>
>A simple question indeed but my reading provides no clear answer. 
>Obviously, you can make a profit if you sell the option directly (rather 
>than exercising), but there appears to be a huge risk if you have to 
>deliver the stock at the strike price once you have sold it. Is the answer 
>that you can simply 'close' the option (and take the money) and the call 
>option then ceases to exist without any further obligation?
>
>Paul

_________________________________________________________________
There’s never been a better time to get Xtra JetStream @  
http://xtra.co.nz/jetstream


----------------------------------------------------------------------------
To remove yourself from this list, please use the form at
http://www.sharechat.co.nz/chat/forum/