selling calls & puts

[Zulu89]

If a trader sells either a call option or a put option and receives the premium, does he/she have to hold the option till expiry or can the position be exited and the premiums kept?

 

[MrGecko]

you can buy back an identical (fungible) option to close the position... paying somebody else a premium (hopefully less than you recieved yourself) for fulfilling the obligations you have with a short option position.

 

[Martinghoul]

As MrG says, options with the same strike, expiry and underlying are fungible, like futures.

 

[Zulu89]

Cheers for clearing that up for me

 

[tripleogstar]

you could simply cover (buy back) the option you sold, or you could buy the put or call on the same strike you just sold (this is the same as closing out your position)

 

[Redbul]

If a trader sells either a call option or a put option and receives the premium, does he/she have to hold the option till expiry or can the position be exited and the premiums kept?

You can do that...but you can't make money out of it so easily (if that's what you're thinking about...).

For instance:

You sell an option and receive the premium for 1000 (the bid) - than you exit and pay 1100 (the ask)
In this example you are -100$ right away since the ask is usually higher than the bid.