“ If the options are going to expire in the money, the writer can both let the underlying shares be referred to as away at the strike price or purchase the option to close
the position. The large losses can end result from an hostile transfer in the underlying's price.
The longer an option has until the expiration, the
better its time value, because there's a greater likelihood it may move into-the-money.
Possibility writers prefer if choices expire nugatory and out-of-the-money,
so that they get to maintain the complete premium.
The loss is the distinction between the strike price and the open market
value of the underlying (detrimental quantity), plus the premium initially acquired.
A trader would not believe that the shares will
rise above $220 within the next two months, in order that
they write a $220 strike worth call possibility for $3.50.
Out-of-the-cash puts expire when the value of the underlying shares closes above the strike price.
Choice writers collect a premium in alternate for giving the purchaser the right to buy or promote the underlying at an agreed price inside an agreed time period. ”