October 23, 2009
Is it possible to trade options without being a writer?
damarcuswilson asked:
I want to trade options but I do not want to be assigned to a buyer or seller which makes me obligated to buy or sell an underlying asset. I have a little money but I do not own stocks.
I want to trade options but I do not want to be assigned to a buyer or seller which makes me obligated to buy or sell an underlying asset. I have a little money but I do not own stocks.
Comments on Is it possible to trade options without being a writer?
Yes. You can purchase (or go long) the options. If you purchase calls, it gives you the option to purchase stock at a particular price (strike price). If you purchase a put, it gives you an option to sell the stock at a particular price (strike price). Basically, "Put the stock to another person".
As a purchaser, only you get to make the decision as to whether you want to exercise your option right or not. But they can auto-execute if you are in the money at expiration.
I suggest that if you have little money, you would be better off not playing around with options. As a heads up, if you think you have information that other's don't, that's called insider information (remember Martha Stewart). It is illegal to trade on non-public information.
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