Chapter 01 · Section 1.1
Options - Purchasing vs. Writing
It is useful to know the important distinctions between FUTURES and exchange-traded OPTIONS.
But first, we must distinguish between purchasing an option and writing an option, because:
a) purchasing an option involves acquiring a right to choose, whereas writing an option involves incurring an obligation to fulfill.
b) purchasing an option involves incurring an obligation to fulfill, whereas writing an option involves acquiring a right to choose.
If someone pays for an option, would they want to acquire a right or incur an obligation?