DEFINITION of 'Writer'

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


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.

  1. Long (or Long Position)

    1. The buying of a security such as a stock, commodity or currency, ...
  2. Premium

    1. The total cost of an option. 2. The difference between the ...
  3. Naked Option

    A trading position where the seller of an option contract does ...
  4. Put

    An option contract giving the owner the right, but not the obligation, ...
  5. Underlying

    1. In derivatives, the security that must be delivered when a ...
  6. Option

    A financial derivative that represents a contract sold by one ...
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  1. What is the difference between "right" and "obligation" on a call option?

    An option is a financial instrument whose value is derived from an underlying asset. A call option is an agreement that gives ... Read Full Answer >>
  2. Does the seller (the writer) of an option determine the details of the option contract?

    The quick answer is yes and no. It all depends on where the option is traded. An option contract is an agreement between ... Read Full Answer >>
  3. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  4. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  5. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
  6. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>

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