OPTION BUYER:
• Pays premium
• Right to exercise, resulting in long spot position (call buyer) or short spot position (put buyer)
• Time works against option buyer
• No performance bond requirement
OPTION SELLER: • Collects premium • Obligation if assigned, resulting in a short position in the underlying spot currency pair (call seller) or long position (put seller) • Time works in favor of option seller When you buy an option you acquire the right, but not the obligation, to take a long or short position in a specific spot currency pair at a fixed price on the expiration date. For this right granted by the option contract you pay a sum of money or premium to the option seller. The option seller (or writer) keeps the premium, whether the option is exercised or not. The seller must fulfill the obligation of the contract if the option is exercised by the buyer.