When you write a long call, who bets that you are not right and is that called going short?

Question

Is it called going short because they are seeing the bet after you wrote it? So if you write a long call and somebody takes your bet, they buy your bet from you, they are betting that the stock will not reach the strike price before the expiration date? Or do all options get bought by a dealer no matter what?

Answer 1

I can understand your confusion. Your question is all wrong since the writer is the seller of the option from whom the buyer buys. It is 1 contract comprising of 100 options that the buyer buys from the seller or writer.
You cannot write a long call since there is no options called long call. A long call means you are a buyer of calls. Shorting a long call means you are selling a bought call to close your long position in calls. Simply selling or writing a call to close your bought position.
Actually when you sell a long call or write to close a bought position you are betting then the buyer is actually betting that the stocks will reach the strike price and go beyond it. When you close the bought position you bet that your earlier bet of the options reaching the strike is folly and you will have to close which means you are betting that the stock won't reach the strike.

Answer 2

The option itself is just a call option. If you buy the call, then you are "long" the call. If you sell the call, then you are "short" the call. (I.e. long or short depends on which side of the transaction you are on, the option itself is simply a call option.)

In simple terms, you buy (go long) a call option if you think the price of the underlying stock will go up before the option expires so that it's above the strike price by more than the amount you pay for the call. (For example, if you pay $2 for a June 50 call, you need the stock price to be above $52 by the third Friday of June in order to make money.)

You would sell (go short) a call option if you think the price of the underlying stock will be less than that amount.

As I understand it, it could be another individual investor or an institution that's on the other side of the trade for your option.

Please note that options can be very risky. If you buy a call and the stock doesn't go up enough by the expiration date, you lose all the money you invested in the call. If you sell a call option and don't own the stock, that's even riskier. In that case, you can lose way more that you invested. For example, if you sell a Jun 50 call for $2 and then the stock of the company goes up to $65, you're going to have to buy the stock for $65 to make good on the call option and then sell it to the call holder for $50. That's a $15/share loss. You only got $2 when you sold the option, so you have to come up with the $13 from somewhere else.

Answer 3

As I mentioned in my answer to your previous question, you cannot "write a long call" since writing a call means selling a call that you do not already own.

If you buy a call you do not know know who is selling it and you do not know if they are writing a call or selling a long call position they already own. it does not make a difference to you since your rights, potential profit and potential loss are the same.

Similarly, you do not know what the motivation of the seller is. For example, the last calls I wrote were covered calls, where I already owned the underlying stock. My motivation was that I thought the premium was too high and I would be happy selling the stock at the strike price if it did rally, and I would be happy to have the cash from selling the options if the stock did not rally.

The seller of a call option might be another private investor, an institution trader or a market maker. It does not matter.