Dictionary of Finance and Investment Terms: option writer
option writer
person or financial institution that sells put and call options. A writer of a put option contracts to buy 100 shares of stock from the put option buyer by a certain date for a fixed price. For example, an option writer who sells XYZ April 50 put agrees to buy XYZ stock from the put buyer at $50 a share any time until the contract expires in April.
In exchange for granting this right, the option writer receives a payment called an option premium. For holders of large portfolios of the premiums from stocks, option writing therefore is a source of additional income.
