The Origin of the Put and Call options
Wednesday, March 4, 2009
We all know that an option is a contract, and we also knew that what your rights are if you possess an options contract. This contract has other sides as well so if you pay money for an option contract, someone has to sell it to you.
The individual selling an option contract can be some trade people, market makers or other people who trade in Forex market, whoever or it could be you as well. This is frequently known as “writing” options and the option seller frequently called as a “writer”. We know that the option buyer only have the rights to buy as well as to sell, so what does that denote to the option writer itself? That sensibly translates into obligations for the writer.
The buyer of a call option always has the rights to buy it, afterward the writer obligate the sell of the call option. Consequently the full statement is that the call writer has the responsibility to sell a convinced amount of shares, if called, at a convinced price, on or before a sure date.
This was the origin of the word “call” the option purchasers always have the rights to “call” shares away from the option writers.
Looking at the other face of the equation, if the purchaser of a put option has the right to sell, then the writer of the put option has the compulsion to buy. The full statement consequently, is that the put writer has the responsibility to buy a certain quantity of shares, if put to, at a convinced price, on or before a convinced date.
The option buyer has the right to “put” shares to the option writer. This is where the term “put” comes from.
The individual selling an option contract can be some trade people, market makers or other people who trade in Forex market, whoever or it could be you as well. This is frequently known as “writing” options and the option seller frequently called as a “writer”. We know that the option buyer only have the rights to buy as well as to sell, so what does that denote to the option writer itself? That sensibly translates into obligations for the writer.
The buyer of a call option always has the rights to buy it, afterward the writer obligate the sell of the call option. Consequently the full statement is that the call writer has the responsibility to sell a convinced amount of shares, if called, at a convinced price, on or before a sure date.
This was the origin of the word “call” the option purchasers always have the rights to “call” shares away from the option writers.
Looking at the other face of the equation, if the purchaser of a put option has the right to sell, then the writer of the put option has the compulsion to buy. The full statement consequently, is that the put writer has the responsibility to buy a certain quantity of shares, if put to, at a convinced price, on or before a convinced date.
The option buyer has the right to “put” shares to the option writer. This is where the term “put” comes from.
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