As far as stock options are concerned, the buyer of options obtains a right by paying a certain fee (royalty) to the seller, that is, the right to buy or sell a specified number of stocks or ETFs (stock portfolio) from the option seller at the agreed time (expiration date) and the agreed price (exercise price).
The market transaction price of options is called royalties. Option fee refers to the fee paid by the option buyer to the option seller in order to obtain the rights conferred by the option contract.
Rights and obligations of options
In option trading, the party who buys the option is called the buyer (long), and the party who sells the option is called the seller (short).
The buyer is the holder of the right, and obtains the right by paying a certain fee (option fee or royalty) to the seller of the option, and has the right to buy and sell the agreed number of underlying securities to the seller at the agreed time and price, so the buyer is also called the right party.
According to the buyer's rights, it can be divided into call option and put option.
Call option means that the buyer (obligee) of the option has the right to buy a certain number of underlying assets from the seller (obligor) at the agreed time and price, and the buyer has the right to purchase.
When the seller of a call option is exercised, he must sell a certain number of underlying securities at the exercise price.
Put option means that the buyer (obligee) of the option has the right to sell a certain number of underlying assets to the seller (obligor) of the option at the agreed time and price, and the buyer has the right to sell.
When the seller of the put option is exercised, he is obliged to buy a certain number of underlying securities at the exercise price.
The seller of the option has no right and assumes obligations. Once the buyer exercises his power, the seller must sell or buy the agreed number of underlying securities at the agreed time and price, so the seller is also called the debtor.