> When shares keep rising, managing the hedge entails buying more stock.
I don’t understand. If I sell a call option on a single share, I can hedge this by buying a single share and not doing anything until the contract expires, right?
Sure you could, but that's not how the dealers are (usually) operating. The option is much cheaper than the stock, so when selling a call option you're unlikely to have the entire position covered. From further down the article:
"Options are a way to get leverage, too, and can work sort of like an extreme version of the margin loan. If you have $100, you can buy options on $1,000 worth of stock, and a dealer will go out and buy $500 worth of stock to hedge that option."
The dealer doesn't own all of the stock they have sold you the option on. So when the stock price goes up, their exposure goes up, and they have to buy more stock to manage it.
If you're happy to own the entire position, why sell the call option?
> When shares keep rising, managing the hedge entails buying more stock.
I don’t understand. If I sell a call option on a single share, I can hedge this by buying a single share and not doing anything until the contract expires, right?