Purchase or Write Options
You may either purchase or write an option -- either a call or a put. Remember, an option is a contract between a purchaser and a writer. An option writer collects the premium as income from the purchaser. The writer of a call must be ready to have her spot position called away or purchase a spot position if the buyer exercises her option. The writer of a put must be ready to purchase (or repurchase) the spot position from the buyer of the put.
If a writer holds a spot position when he enters an options contract, he is said to be a covered writer.
Generally, an options purchaser does so for profit or protection. An options writer does so for income or protection.
By Michael Duane Archer