Options Buyer vs Seller

There are 4 participants in the options markets:
1. Buyers of Call options
2. Sellers of Call options
3. Buyers of Put options
4. Sellers of Put options

People who buy options are called “buyers” or “holders”, and those who sell options are called “sellers” or “writers”. Buyers are said to have “long” positions, and Sellers are said to have “short” positions.

Buyers open a position in the market by buying a security and close a position by selling the security. Whereas Sellers open a position by selling a security and close a position by buying back the security.

When the buyer of the option contract uses the right to buy or sell the security, it is called to “exercise” the option.

On the contrary, when the seller of the option contract is obligated to sell or buy the security when the buyer chooses to exercise the option, it is said that the sellers has got “assigned”. Once he is assigned, he must fulfill his obligation to sell or buy the security as per contract. To avoid assignment, sellers need to close their position by buying back the options.