Both the buyer and seller, in an option trade, establish the position with an opening transaction. The buyer has an opening purchase and the seller has an opening sale. To exit the option position, an investor must “close out” the position. The buyer of the option may exit their position through:

  • A Closing Sale
  • Exercising The Option
  • Allowing The Option To Expire

The seller of an option may exit or close out their position through:

  • A Closing Purchase
  • Having The Option Exercised or Assigned To Them
  • Allowing The Option To Expire

Most individual investors do not exercise their options and will simply buy and sell options in much the same way as they would buy or sell other securities.

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