What does it mean to “sell an option”?
When you sell an option, you receive a premium — money paid to you for taking on an obligation.
- If you sell a Call, you agree to sell the shares at a fixed price (the strike price) if the buyer decides to exercise the option.
- If you sell a Put, you agree to buy the shares at the strike price if the buyer decides to sell them to you.
In other words, you act like an insurer: you receive the premium but take on the risk that the market may move against you.
Who can sell options?
Selling options is available to all clients, but the conditions differ:
- If you are a non-qualified investor, you can only sell covered options — meaning you must have assets or positions that limit your potential risk.
- If you are a qualified investor, you may sell any type of options.
How to obtain professional client status?