Option buyer; has the right to exercise the contract, but not the obligation. They can use stop loss or exit the position at anytime before expiration, but how about option seller who has the obligation but not the right.
Can option seller put stop loss or exit(buy back to close) the position to prevent loss if stock moves in opposite direction? if seller can exit the position while buyer has the right, should there be anything in agreement while selling the contract? I am new struggling with a lot of things. I need explanation plz.
Option Seller has obligation to buy/sell shares only after expiry of contract. Seller can exit any time, and have almost equal rights as buyers in terms of trading.
Seems like its half of knowledge. Rephrasing it.
Having an equal quantity is crucial for exiting a trade smoothly. If a contract has zero volume or lacks seller as counterparty and vice versa for buy position, it limits ability to exit the trade.
Appreciated. Once the seller exited the position(closed his position), the buyer (who was in the contract) on the other hand is in profit and may wait till the expiration date. Now, does the buyer have to sell his contract in the market or the seller, who has exited the position, is still supposed to buy his contract back? I have a lot of confusion being new. Hope you understand. I apologize for any inconvenience.Thanks