I read the intro and i have to say it seems simple and more leverage than a stock purchase. But one thing you did not add is who you buy the option from. Who sells an option contract to a buyer? One of two people - either a person who has purchased an option and wants to liquidate (or close out) this position, or a person who has no position in the contract and who chooses to create, or write it. These people can be either professional option traders, who as "members" of an option exchange have the obligation to make bid and ask prices, or other investors like you. However, if you are purchasing an equity call or put contract to own it (in your brokerage account), it does not matter which of these people sells it to you. Once your purchase order is actually transacted at an options exchange, you own the option contract. The motivations for an investor to either purchase or write an equity option contract are many.
post #81 of 415
8/1/08 at 9:14pm