How can an option writer take care of his risk?
Option writing is a specialized job, which is suitable only for the knowledgeable investor who understands the risks, has the financial capacity and has sufficient liquid assets to meet applicable margin requirements. The risk of being an option writer may be reduced by the purchase of other options on the same underlying asset and thereby assuming a spread position or by acquiring other types of hedging positions in the options/ futures and other correlated markets.
Option writing is a specialized job which is suitable only for the knowledgeable investor who understands the risks, has the financial capacity and has sufficient liquid assets to meet applicable margin requirements. The risk of being an option writer may be reduced by the purchase of other options on the same underlying asset and thereby assuming a spread position or by acquiring other types of hedging positions in the options/ futures and other correlated markets.
