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Buying versus Writing

The person who purchases an option, whether it is a put or a call, is the option BUYER. However, it is possible to sell an option that you do not already own (go short) and the person who originally sells the put or call is the option SELLER (or WRITER).

Option buyers have rights to the underlying stock whereas option writers assume obligations to either buy or sell underlying shares. It is therefore very important that option writers understand the risks they are assuming and understand how to cover them.