Using options to play the market

Investing

 The option buyer has the right and option seller has the obligation, that is, option buyer may or may not exercise the option given, but, if he decides to exercise the option, the option seller has no choice but to honour the obligation.

 So for the option buyer the loss is limited to the premium paid to buy the option, while the profits are unlimited. For the seller of the option the position is reversed.

 A very simple example of an option can be explained in the following way