There is one thing I do not get about trading options (let's restrict this to calls), and no online resource I've come across seems to talk about the following scenario. There are 3 parties in this: A, B, and Me.
Feb 1: XYZ is trading at $100. I DO NOT own XYZ. I buy 100 calls for a $2 premium, so that's $200. The contract expires on Feb 24.
Feb 9: The CEO of XYZ marries Trumpf's daughter, Bianca, and XYZ jumps to $109. Now, this option is selling at, let's say, $6.
Feb 10: Let's assume, that the option price remains at $6. I decide to sell the option to "A". I make $400 = $6*100 - $2*100.
Universe I: At expiry date, "A" does not exercise the option regardless of its appreciation or depreciation. Feb 24: I walk out with $400, and I don't have to worry about anything anymore.
Universe II: Option price HAS remained constant until expiry date. "A" decides to exercise the option. Feb 24: I do not own XYZ, what happens?
Universe III: Option price HAS increased substantially. "A" decides to exercise the option. Feb 24: I do not own XYZ, what happens?
Universe IV: Option price HAS increased substantially. "A" decides to SELL the option to "B". Feb 24: I do not own XYZ, did "A" just LIFT any liability off of me?