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Clemen Langston: What Role Does the Option Seller Play?

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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.

 

2. Income Generator 

   • By selling options, the seller can immediately collect the option premium which is the primary source of income for the seller.

 

3. 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.

 

4. Market Participant 

   • Sellers provide liquidity in the options market, making it easier for buyers to trade options.

 

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