by Ken Trester 09/11/08
In other words, you have the opportunity to take the bet rather than make the bet. Taking the bet refers to option writing (selling) -- the direct opposite of option buying.
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When you go to wager on sports in Nevada, the job title of the person who takes your bet on a football or basketball game is called a sports writer. The person who takes your bets when you play Keno is called a Keno writer.
Now you have the opportunity to be a writer, an option writer, where instead of buying an option, you sell an option and the option premium (price) goes directly into your account.
That's right you read it correctly -- when you sell options, money instantly goes into your brokerage account.
The beauty of an option seller compared with the "house" or a bookie is that you have the ability to close the door. In other words, you have the ability to close out your position and obligation at any time by buying back the option.
I know you're here to make money and, for many of you, buying call and puts (for a small debit) is just fine. But if you'd like to expand your horizons, if you're the kind of trader who doesn't mind a little more risk or adding one extra step to your options trades, you can open yourself up to a new and exciting tool to your trading arsenal to play the options game for profits by selling options in addition to buying them.
One of the safest ways to sell options is to sell them against a long stock position or a long option (that is, one you have purchased), because the long position will serve to limit your losses if the trade doesn't go your way.
Option selling can be played by all types of option investors, from the conservative set to the risk-takers and, in all cases, can provide an excellent source of income.
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