Who is referred to as the buyer of an option contract?

In the context of options trading, the buyer of an option contract is referred to as the "holder." The holder has the right, but not the obligation, to buy (in the case of a call option) or sell (in the case of a put option) the underlying asset at a specified price, known as the strike price, before or on the expiration date of the option. This position allows the holder to benefit from potential price movements in the underlying asset. The holder pays a premium to acquire this right, which represents their investment in the option.

The other roles in options trading include the writer, who is the seller of the option and incurs the obligation to fulfill the contract if the holder chooses to exercise the option; the seller is often synonymous with the writer in this context. A broker facilitates transactions between buyers and sellers but does not typically engage in the buying or selling of options contracts themselves. The distinct role of the holder is crucial because it emphasizes the advantage and flexibility afforded to those who purchase options, setting them apart from other market participants.