For me, I use options strategies to lower my risks while getting higher gains compare to a regular investor and I call this the unfair advantage. On top of the unfair advantage, if my trade goes wrong, I have repair strategies. It comes to a point, when you see what I do, you realize the concepts I use ( with an actual live portfolio to show ) you will realise it's very possible for anybody.
One of the many things that can prove confusing to new options investors is the jargon: puts, calls, buy, sell, write, long, short, expiration, strike, in the money, out of the money, diagonal, covered, naked, sell to open, buy to close, and so on, seemingly ad infinitum. I'd like to expand on two particularly common options terms and why they are synonymous.
One of the simple strategies I use is writing options. By receiving premiums instantly upon writing, I have instantly lowered the cost of purchase.
Write = Sell to Open
In any discussion regarding selling to open an option position, you'll almost always see the word "write" used. In that context, "write an option" means "sell to open an option" -- that is, go to your broker and tell him to open a brand-new option position for you by selling it. But why use the word "write"? It's confusing.
What follows is strictly my own speculation, but I think it might be write ... er, right.
Remember, an option is a contract between two people. A put, for example, is a promise made by one person to another person in which the first person agrees to buy shares at an agreed-upon price at a time of the second person's choosing, up until some future date.
These are very standard contracts; if it helps, you can actually think of them as paper forms with blanks to be filled in. The strike price goes here, expiration date there, agreed-upon premium over in this spot, legalese language defining and explaining everything comes next, then a signature down at the bottom. As the seller of this contract, you're the one filling in the blanks. You are, in effect, writing out that contract and then shopping it to potential buyers.
Thus we use "write" to mean "sell to open."
Who Is It?
So to whom, exactly, did we sell that contract? Probably a market maker, or maybe another investor, like a hedge fund. In truth, it doesn't really matter. With a stock, there's a buyer and a seller. We don't really care who they are (or why they're interested), as long as they're willing to transact with us. With options, it's the same situation. We just sell our contract to ... someone. It doesn't matter who.
Why did they buy it? Doesn't matter. They have their own motivations.
What are they thinking when they exercise it or let us close it early? Doesn't matter.
And finally, when we close the position, from whom are we buying it? You guessed it: Doesn't matter.
Regarding that last point, there's sometimes a tendency to think that the person on the other side of the "buy to close" transaction is the same one who bought it from us in the first place. In fact, that's almost certainly not the case. You see, the original buyer could have sold their side of our contract to somebody else, and that person could have sold it, and on and on. It could have traded hands a dozen times, or it could have stayed put. Our "buy to close" transaction could even be with another market maker opening a new position or closing an old one.
Thankfully, we don't need to keep track of all that. As far as we're concerned, the details of matching up buyers with sellers happen automatically behind the scenes. You likely don't concern yourself with the mechanics of the transaction when you buy or sell shares of stock; there's no reason to do so here, either.
In short, don't worry who's on the other side of the contract. Just be glad there's someone there willing to buy or sell what you want to sell or buy.