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I was reading documentation on options on the Montreal Exchange's website and came across the following statement:

"Remember, however, that neither the buyer nor the writer is obliged to see his option positions through to expiration. The buyer may resell his options whenever he pleases at the market rate while the writer can terminate his obligations by repurchasing his option series at the current premium (closing transaction v. opening transaction)."

I am looking for some information to support the fact that an options writer can terminate his obligations by repurchasing his series.

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The option seller gets out of his position early by buying back the option. If you were the buyer, you are not forced to sell, he simply finds a new guy willing to go short.

The option buyer, on the other hand, can exercise early, and that might be assigned to an unhappy writer.

  • So from what I understand it is true that both parties can "exit" the trade. – gmorissette Mar 26 '17 at 2:19
  • Yes. The position is traded like a stock, in the sense that it can be bought or sold to close early. – JoeTaxpayer Mar 26 '17 at 3:01
  • Why then would someone purchase options as a hedging strategy when they could see their options contract "cancelled" (repurchased by writer) at any given point? – gmorissette Mar 26 '17 at 14:14
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    It's only "cancelled" for the seller. The buyer still has his position only the counterparty has changed. Completely transparent to that buyer. – JoeTaxpayer Mar 26 '17 at 14:42

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