If you buy a pencil and stick it in your pocket, you own it, right? But if you sell it, you no longer own it. It is no longer in your pocket, it cannot stick you or do anything more because it is gone.
Same thing with a stock or option or bond or commodity or a spaceship or a car. When you sell it, it is gone and it can no longer affect you or be any consequence to you. If you sell something you own, it's gone. If you sell something you don't own, then you have a contract with someone that spells out the rules for doing that, and that contract will remain open and you will have an obligation to the other person in the contract until you close it.
You should read at least one book about options before trading them. Lawrence McMillan is the option guru; check out the library and the Interlibrary Loan System. Investing/trading is one area where learning something first really can pay off.
This same question was answered here:
http://answers.yahoo.com/question/index?...
Before asking more questions, you might try explaining what it is you don't understand specifically.
For the last couple of months I have been reading about options and trading them. I just needed some clarification on a few things:
When trading options I get that you can buy a call option at a certain strike price and when the underlying stock goes up you can make a profit by selling the call option. Now my question is if I wanted to sell this option would it now be called "writing" or would I just be selling it back to the market and getting the profits from it. Because I read that when you sell options it's called writing them and whoever buys it can exercise the option but what if you don't own the underlying stock?
So the main thing I want to know is: If I buy a call option and I make a profit on it and sell it back to the market. Is there anything else I need worry about after I sell it and get my earning from it, since I do not own the stock that is the underlying of the call option.
(Hope this makes sense)
