Options writing

Options writing

Options writing is a term used to describe any option trading strategy that involves selling options. The primary objective in writing options is to earn the premium paid by the option buyer. An option writer sells options intending to profit from the decline of extrinsic value on options, referred to as time value. If the option expires without being exercised, the writer keeps the full amount of the premium. [1] If the option buyer exercises the option, however, the writer must pay the difference between the market value and the exercise price.[2]

The term option writing, however, does not refer to any actual writing of a contract.

Option writing strategies include covered calls, Naked calls naked puts, bear call spreads and bull put spreads. If the writer offsets (closes) an open position at a lower price than at which it was opened, the writer realizes a profit.[2]


  1. ^ Selling Options 21 September 2009
  2. ^ a b McMillan, Lawrence G. (2002). Options as a Strategic Investment, 4th ed., New York : New York Institute of Finance. ISBN 0-7352-0197-8

Wikimedia Foundation. 2010.

Игры ⚽ Нужно решить контрольную?

Look at other dictionaries:

  • Writing style — is the manner in which a writer addresses a matter in prose, a manner which reveals the writer s personality, or voice. It is particularly evident in the choices the writer makes in syntactical structures, diction, and figures of thought. The… …   Wikipedia

  • Options strategies — can favor movements in the underlying that are bullish, bearish or neutral. In the case of neutral strategies, they can be further classified into those that are bullish on volatility and those that are bearish on volatility. The option positions …   Wikipedia

  • Options broker — Options brokers specialize in offering options trading, research, education and other tools to individual investors. In addition to common options trades like covered calls, option spreads, and straddles, many options brokerages offer trading in… …   Wikipedia

  • Writing systems of Africa — The Writing Systems of Africa refer to the current and historical practice of written language on the African continent. The importance of oral culture and tradition in Africa and the recent dominance of European languages through colonialism,… …   Wikipedia

  • Butterfly (options) — In options trading, a long butterfly (sometimes simply butterfly) is a combination trade resulting in the following net position: * Long 1 call at (X − a) strike * Short 2 calls at X strike * Long 1 call at (X + a) strikeall with the same… …   Wikipedia

  • Interactive writing — is a method used in literacy teaching, especially for young children, whereby the students have the opportunity to practice their reading and writing skills in a safe and creative environment. In this method the teacher(s) and students write to… …   Wikipedia

  • Forex Option & Currency Trading Options — A security that allows currency traders to realize gains without having to purchase the underlying currency pair. By incorporating leverage, forex options magnify returns and provide a set downside risk. Alternatively, currency trading options… …   Investment dictionary

  • Credit spread (options) — Finance Financial markets Bond market …   Wikipedia

  • X (writing speed) — In computer jargon, the speed at which data is written to (or read from) an optical disc (like a CD or a DVD) is shown as a multiple of X. For example, writing to a DVD at 8X will take less time than writing to it at 4X. [cite… …   Wikipedia

  • ratio writing — When an investor writes more than one option to hedge an underlying futures contract. These options usually are written for different delivery months. Ratio writing expands the profit potential of the investor s option position. Example: an… …   Financial and business terms

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”