Writer

Dictionary Says

Definition of 'Writer'

The seller of an option who collects the premium payment from the buyer.
Investopedia Says

Investopedia explains 'Writer'

For example, a writer holds a short position on a call option. If the call option is exercised, then the writer has to sell the underlying stock at the strike price of the option. Conversely, if you are the writer of a put option, you are said to be long, and must purchase the underlying stock at the particular price.

Being a writer is relatively risky - especially on a naked position. This technique should not be used by those who are new to option markets.

Related Definitions

  • Call

    1. The period of time between the opening and closing of some future markets wherein the prices are established through an auction process.2. An option contract giving the owner the ...
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  • Option

    A financial derivative that represents a contract sold by one party (option writer) to another party (option holder). The contract offers the buyer the right, but not the obligation, to ...
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  • Naked Option

    A trading position where the seller of an option contract does not own any, or enough, of the underlying security to act as protection against adverse price movements. If the price of ...
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    • Premium

      1. The total cost of an option. 2. The difference between the higher price paid for a fixed-income security and the security's face amount at issue.3. The specified amount of payment ...
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    • Put

      An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time. The buyer of a put option ...
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    • Short (or Short Position)

      1. The sale of a borrowed security, commodity or currency with the expectation that the asset will fall in value.2. In the context of options, it is the sale (also known as "writing") of ...
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    • Strike Price

      The price at which a specific derivative contract can be exercised. Strike prices is mostly used to describe stock and index options, in which strike prices are fixed in the contract. ...
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    • Seller

      1. An individual or entity that exchanges any type of good or service in return for payment.2. In the option market, the seller is the investor who collects a premium from the buyer in ...
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    • Underlying

      1. In derivatives, the security that must be delivered when a derivative contract, such as a put or call option, is exercised. 2. In equities, the common stock that must be delivered ...
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    • Long (or Long Position)

      1. The buying of a security such as a stock, commodity or currency, with the expectation that the asset will rise in value.2. In the context of options, the buying of an options ...
      Read More »

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