Writer

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DEFINITION of 'Writer'

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

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 TERMS
  1. Option

    A financial derivative that represents a contract sold by one ...
  2. Long (or Long Position)

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

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

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

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

    1. In derivatives, the security that must be delivered when a ...
RELATED FAQS
  1. 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 >>
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