The market participants in options can be divided into four categories. Thisincludes the buyer of calls, the buyer of puts, the seller of calls and sellers of puts. When you enter into a buy of a call or aput option then you are the option holder. When you sell either a call or a put option then you are an optionswriter. Check this useful reference about Bitcoin Code before you start to trade on options.
Buyers and sellers
Those who buy options have along position and those who sell options take a short position. There are some differencesbetween the buyers and the sellers.
Thosewho buy the call or the put options do not haveany obligation to buy or to sell that asset. When you buy either a call or a put option then you get the purchasing right of that asset at a future date, however, if you do not want to exercise this right then thismeans that your option contract willexpireworthlessly.
If you, however, sell the options contract that is if you are an options writer then you are obliged to buy or to sell that asset if the buyerchooses to exercise his option. Everyoption contract will have two sides and the obligation on both the sides is not the same. When you sell the options contract then you take large risks andthus it isrecommended that if youare new to options trading then you buy rather than sell theoptions contract.
To understandprofitability in the options market you need to understand some terminologies. When the option is said to be in-the-money then this means that you have started to accumulate profits in your position. If the option is out-of-the-money, then this meansthat you have started to accumulate losses in your position. Ifthe option is at-the-money, then this meansthat the market price is equal to the strike price and thus you are neither making any profits or any losses on your position.
Thebuyer of an option takes the lesser risk as compared to an options seller. Theseller of an option has to deal with the volatile market movements in case thebuyer decides that he wants to exercise his option. The option writer has to execute the trade in case the buyer chooses to. However, the buyer of the option has no obligation to exercise his option at expiry. Sellingoptions are thus considered riskier.