Investment Term For The Day - Writer
Sep 17, 2021 ·
2m 10s
A writer sometimes referred to as a grantor is the seller of an option who opens a position to collect a premium payment from the buyer. Writers can sell call...
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A writer sometimes referred to as a grantor is the seller of an option who opens a position to collect a premium payment from the buyer. Writers can sell call or put options that are covered or uncovered. An uncovered position is also referred to as a naked option. For example, the owner of 100 shares of stock can sell a call option on those shares to collect a premium from the buyer of the option; the position is covered because the writer owns the stock that underlies the option and has agreed to sell those shares at the strike price of the contract.
A covered put option would involve being short of the shares and writing a put on them. If an option is not covered the option writer theoretically faces the risk of very large losses if the underlying moves against them.
Option writers collect a premium in exchange for giving the buyer the right to buy or sell the underlying at an agreed price within an agreed period of time.
A put or call can be covered or uncovered, with uncovered positions carrying much greater risk.
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A covered put option would involve being short of the shares and writing a put on them. If an option is not covered the option writer theoretically faces the risk of very large losses if the underlying moves against them.
Option writers collect a premium in exchange for giving the buyer the right to buy or sell the underlying at an agreed price within an agreed period of time.
A put or call can be covered or uncovered, with uncovered positions carrying much greater risk.
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