In a Put and Call Option, the Owner can force the Purchaser to buy his Asset (Put Option). Similarly, the Purchaser can force the Owner to sell the Asset (Call Option). If neither the Owner nor the Purchaser exercises their Option then the sale never takes place.
Under the Call Option, the Purchaser may exercise the option to require the Owner to sell their Asset to the Purchaser. Under a Put Option, the Owner may exercise the option to require the Purchaser to purchase the Owner’s Asset.
1) the Owner grants to the Purchaser a call option. This entitles the Purchaser to call upon the Owner to sell the Owner’s Asset; and
2) the Purchaser grants to the Owner a Put Option. This entitles the Owner to put to the Purchaser the purchase of the Owner’s Asset.
What if the Purchaser does not decide to use their Call Option? The Owner can still use their Put Option and force the sale. What if the Owner decides not to use their Put Option? The Purchaser can still use their Call Option and force the sale. Only if BOTH parties decide not to use their Options that the sale doesn’t happen. Only ONE person needs to exercise their Option to make the sale happen.
The Put and Call Option is a legally binding contract. It is where two parties buy the right to purchase or to sell an Asset at some point in the future. The parties have the right to either enforce the option or to let the option lapse. The parties choose how long the Options are opened for. This is called the Option Period. The Option Fees can be $1 or $100 000 or whatever amount is agreed. It is non-refundable. If you do exercise either of the Options, the Purchaser pays the Purchase Price by the Settlement Date. Use this agreement for real estate, cars and equipment. They may be used for interests in a business. This includes Business Succession Planning agreements.
1) How long the option is open for (Option Period)
2) The date the option is exercised (Exercise Date)
3) When full payment of the Purchase Price occurs if the option is exercised (Settlement Date)
4) Details of the Asset
5) The Option Fees that will be paid by both parties.
6) The Purchase Price of the asset if the option is exercised (Purchase Price)
Have a look at the Sample document. There are many training videos and hints to help you as you build the Put and Call Option.
I wrote my doctorate on Put and Call Options. For a copy of my research just email me.
Adj Professor, Dr Brett Davies, CTA, AIAMA, BJuris, LLB, Dip Ed, BArts(Hons), LLM, MBA, SJD
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