Allow me to explain.
Let's say I sell 1 covered call and receive the premium. When I sell a call, I am assuming that someone on the other end would have bought my call (say Nora).
If the share price goes above my covered call's strike price. Nora can take two courses of action:
- Exercise the option
- Sell to close - Nora can sell a call contract to close her position.
In the first case, it is understandable that Nora bought my shares at the strike price and she will own the shares.
But what if Nora sells to close, what happens to my shares? Who owns them now?