short call/put

#1
anoder newbie how exactly does the sell option work ??? as in if i buy a long call or put option i sell to someone else before the expiry, who in turn can again sell the contract to someone else. a long option can change hands multiple times. what about short options in this context. can the person whom i sold short call or put sell it to someone else before it expires??? what about the margin money??? who pays for it if the owner exercises the contract??? :confused::confused::confused:
 

gunsho

Well-Known Member
#2
anoder newbie how exactly does the sell option work ??? as in if i buy a long call or put option i sell to someone else before the expiry, who in turn can again sell the contract to someone else. a long option can change hands multiple times. what about short options in this context. can the person whom i sold short call or put sell it to someone else before it expires??? what about the margin money??? who pays for it if the owner exercises the contract??? :confused::confused::confused:
We don't have to worry about what is happening to the contract after we sell the option. That is taken care by system/brokers via settlement. All we care is, we stand in a position that we have sold an option.

In India we cannot exercise before expiry. It is done on the settlement state or you close the position before expiry. You can google to find more info about options basics. You can also search previous discussions in traderji as many times these kind of topics are discussed. You can also talk to brokers regarding such topics.

Here is one such link. http://www.optionseducation.org/basics/
 

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