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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Call/Put options
Hello Mr Moffat,
Hope you are fine.
My question is about buy/sell options. I am happy with its calculations parts. But I have a little problem with its concept!
For example in delta hedge, what does ” selling call option” means?!!!
As far as I know, call option means when someone has a right to buy shares at a fixed price in the future! So now what does selling a right to buy a share means ?!!!!! We are selling what ?!!!! (or the same question about buying a put option!)
Kind Regards
Thank you in advance
You are selling to someone else the right to buy a share at a fixed price. Effectively it means that you are the dealer (someone has to sell the rights for people to be able to buy them 🙂 )
If you watch the lecture on this then you will see that in real life it is the dealers in options who really are the ones who create the delta hedges, by buying shares.