Obligations when selling options

Q: I recently bought a call option. Since then, the stock price has risen and so has the call option. I wish to sell my call option for a profit but am I obligated to deliver the underlying stock if the option buyer decides to exercise his call option?

A: The short answer is "No". You might have heard that options sellers have obligation to deliver the underlying stock. That is true only when you sell the call option as an opening transaction - also known as a sell-to-open transaction. In your case, it is a sell-to-close transaction, meaning you are selling the option to close out your open long call position and will no longer be a party in any contract and hence you are not obliged to deliver any stock.

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