00:02
So the trader sells the right but not obligation to buy an asset from himself.
00:12
So let's talk about whether or not call holders have the right to buy an underlying or an obligation.
00:32
The market price of an option is called a premium.
00:43
This is the price paid for the rights provided by the call option.
00:47
If at expiration the underlying asset is below the strike price, the call buyer loses the premium paid.
01:25
They are under no obligation to buy the stock for a higher price than the market price is currently valuing the shares.
01:35
If it is above the strike price, the buyer can purchase the shares below market value and make a nice profit.
01:44
Option contracts give the investor the option to make good on the contract.
02:36
The buyer of an option is therefore not obligated to buy the stock at the strike price.
03:14
They have the right to do so if they choose...