Writer
Candlefocus EditorAn option writer enters into a contract with the option buyer, providing the buyer with the right to buy (a call option) or sell (a put option) the underlying security at an agreed price (the strike price) within an agreed period of time (the expiration date). In exchange, the option writer collects a premium from the option buyer. It is this premium that is the source of income for the option writer, who usually expects the options they write to expire out-of-the-money (OTM), thus keeping the entire premium for the writer.
On the other hand, an option buyer hopes that the option will expire in-the-money (ITM) and that the writer will be forced to buy or sell the security at the agreed upon price. Option writers can take a position on either a covered or uncovered basis. A covered position is a position in which the writer owns the security they're writing options on, and the premium is their only risk. An uncovered position, however, is a position in which the writer does not own the security, exposing them to the possibility of greater losses if the option is exercised.
In conclusion, an option writer is the seller of an option who collects the option premium from the option buyer in exchange for providing them with the right to buy or sell the underlying security at an agreed price within a certain period of time. While the option writer hopes that the option will expire worthless, the option buyer hopes that the option will expire in-the-money. Moreover, the writer can take a covered or uncovered position with the option depending on their preference.