Rights and responsibilities of the buyer and seller

Question

Write down the rights and responsibilities of the buyer and seller for the Call and Put options?

Answer 1

Rights and responsibilities of the Buyer for Call Option are illustrated below:

- Pays premium
- Right to do exercises and buy the shares
- Profits from increasing prices
- Limited losses, not limited gain

Rights and responsibilities of the Seller for Call Option:

- Receives premium
- Compulsion to sell shares when exercised
- Profits from declining prices or remaining unbiased
-  Not limited losses, limited gain

Rights and responsibilities of the Buyer for Put option:                                                                               

- Pays premium Right to exercise as well as sell shares
- Profits from declining prices
- Limited losses, not limited gain

Rights and responsibilities of the Seller for Put option:

- Receives premium
- Obligation to buy shares when exercised
- Profits from increasing price or residual neutral
- Potentially unlimited losses, limited gain