Writer
The writer is the counterparty to an option (conditional futures contract) who issues or sells the option for a premium. The counterparty to the option is called the buyer or holder.
The term writer expresses that this counterparty is in a standstill position until the option is exercised by the buyer as follows:
- In the case of a purchase option , he has the base value ready in the required quantity.
- With a put option it holds the required amount of money ready to possibly tendered by the option buyer Underlying to acquire.
With American options, the writer is dependent on the decision of the option buyer for the entire term of the option. In the case of European options , it is only dependent on the decision of the option buyer at the end of the term. The writer bears a considerable risk, which depends on the price development of the underlying.