Understand the distinction between call and put writing: In general, when investing in the stock market, you will encounter a lot of volatility. To protect yourself from the market's short-term volatility, the market has provided us with something called options, which help us hedge our risk. Options involve two parties: the buyer and the writer.

In this article, we will look at the writer's perspective on options and compare Call vs Put writing.

What Exactly Is An Options Contract?
A derivative contract in which the value is derived from an underlying asset is known as an options contract. This contract is made between the buyer and the seller/writer for a future date at a predetermined price. The buyer receives the right, but not the obligation, to execute the contract on or before the expiration date. The buyer of the contract will have to pay a premium to the writer when entering into the contract for this option.

The seller/writer, on the other hand, relinquishes the right of execution and is obligated to execute or not execute the contract based on the buyer's decision. The writer is compensated by the seller for giving up this right.

The buyer's loss is limited to the premium paid, while the potential profit is unlimited. The writer's profit is limited to the premium received, with the possibility of incurring an unlimited loss. What Exactly Is A Call Option?
A call option is a contract entered into between two parties in which the buyer receives the right but not the obligation to purchase the underlying asset on or before the expiration date.

What Exactly Is A Put Option?
A put option is a contract between two parties in which the buyer receives the right but not the obligation to sell the underlying asset on or before the expiration date.

What Are the Advantages of Writing an Option?
With the above explanation, it is clear that the option writer's upside is limited to the premium received, while the downside is unlimited. So, why do people choose to write an option? Read more on: Understand the distinction between call and put writing