Who is on the other side, and why is their risk shaped differently?

Every option you buy was written by somebody. The writer takes your premium up front and accepts an obligation in exchange. This is not "the same trade in reverse" in any comfortable sense — writing inverts the payoff into a fundamentally different risk profile, and the difference is where most catastrophic options losses live.

The inversion

Read the last two rows together, because they are the whole lesson. The writer wins small, frequently. The writer loses large, rarely. Those are not the same statement as "the writer has an edge."

Writing a call you do not own the stock for

Stock at $100. You write one three-month $105 call and collect $3.00 ($300).

• Stock at $105 or below at expiry → the call expires unexercised. You keep $300. This is your maximum profit on the contract, forever, no matter how well things go.
• Stock at $130 → you are obliged to sell at $105 something you must buy at $130. That is −$25 per share, plus the $3 you collected = −$22 per share = −$2,200 on a contract that paid you $300.
• Stock at $200 → −$9,200.

There is no highest price a stock can reach. The loss on a naked short call is theoretically unlimited. No other common retail instrument has that property in this form, which is exactly why brokers gate naked call writing behind their highest approval tiers.

Writing a put

Same stock. You write a $95 put and collect $2.00 ($200).

• Stock at $95 or above → expires unexercised, you keep $200.
• Stock at $40 → you must buy at $95 something worth $40: −$55, plus the $2 = −$53 per share = −$5,300.
• Stock at $0 → −$95 + $2 = −$93 per share = −$9,300.

Bounded, technically — a share cannot fall below zero. But the bound is 46.5 times the premium you collected. "Limited risk" is doing a lot of work in that sentence.

The win-rate illusion

Writing out-of-the-money options wins most of the time. That is a mathematical consequence of selling things that usually expire worthless, not evidence of skill. A pattern that wins 90% of the time and loses twenty times the win on the other 10% has a negative expectancy while feeling, month to month, like a reliable income stream.

This is the single most common way experienced-feeling options writers get hurt: a long run of small wins builds confidence and position size, and one gap does the arithmetic.

Margin turns a paper loss into a forced one

Writers post margin, and the requirement grows as the position moves against them. A move that would eventually have reversed can still finish you, because the broker can close the position at the worst available price when margin is not met. Being eventually right is not a defence against being closed out today. This is leverage doing what leverage does, and it is the theme of this whole domain.

In the data

Apple's chain is below, in the EODHD Terminal. Look at the open interest (OI) column.

Open AAPL.US — options in the EODHD Terminal

Open interest counts the contracts outstanding, and every one of them has a writer: the single number covers both sides at once. Nothing on the chain says who wrote what, and a change in open interest says the count moved without saying which side opened or closed. Every published options figure describes the contract; none of them describes who is holding it.

Try it now

1. Take an out-of-the-money call from the chain above — any expiry, any strike above the current price — and read its premium. Compute the writer's maximum gain (premium × 100), then the writer's loss if the stock rose 50% by expiry.

2. Express the second number as a multiple of the first. Say the ratio out loud.

3. Do the same for an out-of-the-money put using a decline to one-third of today's price. Note that the put writer's loss is bounded and the call writer's is not — and that "bounded" here still means a multiple you would not enjoy.

A note on what we do here. This lesson describes how writing works so you can recognise the risk when you see it, and for no other reason. Writing options can lose more — in the case of naked calls, unboundedly more — than the premium received. Nothing here suggests you should write anything.