Options Trading Tutorial - Who purchases a call or put if you sell under the strike price but at a profit? (American options)?

Who purchases a call or put if you sell under the strike price but at a profit? (American options)?

For example, I purchased a call at $1 with with a $40 strike price with 6 months before expiration and the current underlying stock price per share that is say $25. Say in 3 months the stock ramps up to $35 and the option is now worth $5. I decided to sell in the in 3 months before chancing a decline with 3 months left. When I sell, does the clearing house have to purchase it back? Is the writer of the call obligated to pay even if it never hit the strike price? Or is it market makers purchasing the option? I just do not understand this point in technically who is paying me off in this type of example as I rarely wait it out until I have lost all time value? Thank you in advance!!

Public Comments

When you sell your "out of the money" call, there is another counterparty who is buying it. The original party that wrote the call is still on the hook until the strike date, if the share price should ever go up over the strike price. In fact, he/she does not even know that you have sold. Hope it helps.