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. Option

    A financial derivative that represents a contract sold by one ...
  2. Call

    1. The period of time between the opening and closing of some ...
  3. Premium

    1. The total cost of an option. 2. The difference between the ...
  4. Long (or Long Position)

    1. The buying of a security such as a stock, commodity or currency, ...
  5. Naked Option

    A trading position where the seller of an option contract does ...
  6. Underlying

    1. In derivatives, the security that must be delivered when a ...
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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. Do hedge funds invest in commodities?

    There are several hedge funds that invest in commodities. Many hedge funds have broad macroeconomic strategies and invest ... Read Full Answer >>
  4. How do hedge funds use equity options?

    With the growth in the size and number of hedge funds over the past decade, the interest in how these funds go about generating ... Read Full Answer >>
  5. 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 >>
  6. 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 >>

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