How is it different from selling an option on a stock you own?
How is it different from selling an option on a stock you own?
When you sell the option, you still own the stock, you are selling the right to buy it from you at a set price.
An option is the right to execute at a specific price on a certain date. You aren’t required to exercise the option and your risk is only what you paid for the right to own the option. Call expecting price to go up, Put expecting price to go down.
A short sell you sell a borrowed share of stock at current market price. When you close - you MUST purchase the stock to close the position - independent of the cost - shorts have potentially infinite price exposure.