Option buyer

Option buyer: is the one who buys the right to exercise his option on the seller/writer. He’s often referred to as the option taker (holder), pays the option premium. In case of call options, a taker pays premium and gets the right to buy shares whereas when buying put options he pays premium to obtain the right to sell shares.

The ability to exercise the contract occurs when someone becomes a taker. It’s important to note, that there are 2 parties in the option contract and each option buyer corresponds to the option seller. Thus, buyers can exercise their rights on the seller only to the extent determined by the particular option contract specificity.

Suppose, we decide to buy the option with the strike at $90 for $20. This sum is paid to the option seller to let us become the owner of the contract. After these actions we, being the option taker, may exercise it on the seller under option features. If it comes to the call option this right can be exercised beyond the price of $110 ($90 +$20).

Options Glossary