Investor Glossary-option writerInvestor Glossary-option writerInvestor Glossary-option writerInvestor Glossary-option writerInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Option Writer

The HTML to link to this page
 

An option writer is an individual or entity that has sold an option contract on an exchange to an option holder. Thus the option writer immediately receives the proceeds of the option sale. Depending upon the option type, the option writer could be called upon to deliver the underlying asset at any time prior to expiration, if it is an American option, or on the expiration date, if a European option. An option writer can also close out the position by buying an identical contract. If the option writer does not have a position in the underlying asset, the option writer has what is called a naked option. A naked option creates considerable loss exposure for the option writer. For instance, if an option writer sells a call option to deliver IBM common stock for $80 and does not own IBM shares, and if the option holder exercises when the market price of IBM is at $92, the option writer will lose $12 per share.



Rate this option writer definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: implied volatility, EBITDA, APR, liquidity ratio, labor relations, VIX, current ratio, 1031 exchange, balance sheet, ex-dividend, FTSE, risk management, Zero Cost Collar, retained earnings, dividends payable, stock market close, phantom income, diluted share, debt service coverage, required rate of return, 1035 exchange, command economy, inflation, 144a, real GDP, annual return, limit order, deferred tax, stock split, 401a, wholly-owned subsidiary, margin rate, class C shares, option premium, in escrow, open position, deferred revenue, Key Rate Duration, minority interest, per diem, ex-dividend date, covered put, reverse mortgage, cancelled check, average price per share, FICO score, quality assurance, LIBOR, irrevocable trust


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2015 Investor Glossary - All rights reserved - Terms of Use