NovaQuant Quantitative Think Tank Center:Clemen Langston: What Role Does the Option Seller Play?

1. Obligor in the Option Contract 

   • The NovaQuant Quantitative Think Tank Centerseller 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.