Option Writer refers to a market participant who sells options contracts to earn a premium. In the derivatives market, option writing is considered a sophisticated strategy where the writer assumes the obligation to buy or sell the underlying asset if the buyer exercises the option. This role is essential for maintaining liquidity and balance in the options segment of the financial markets.

When an investor writes a Call Option, they agree to sell the underlying asset at a predetermined strike price if exercised by the buyer. Conversely, writing a Put Option obligates the writer to purchase the asset if the buyer chooses to sell. In both cases, the option writer earns a premium upfront, which serves as potential profit if the option expires worthless. However, unlike buyers whose risk is limited to the premium paid, writers face potentially unlimited losses, especially in uncovered or ìnakedî positions.

Option Writing Strategies are often used by experienced traders and institutions to generate income or hedge existing positions. Common strategies include Covered Call Writing, where the writer owns the underlying shares, and Cash-Secured Puts, where sufficient funds are held to buy the asset if assigned. These strategies help in risk management and provide consistent income during stable market conditions.

However, option writing demands a deep understanding of market volatility, time decay, and margin requirements. Regulatory bodies like SEBI in India advise that traders must assess their risk appetite and ensure adequate capital before engaging in such trades. For retail investors, option writing should be approached cautiously and preferably under expert guidance or after acquiring sufficient knowledge through certified market education programs.