11.20Who is an option seller?
1What is it?
The option seller (writer, "short") receives the premium and takes on the obligation.
2Why does it exist?
Sellers earn when options lose value, but face large or unlimited losses: a short call loses without limit if the price soars. Selling needs large margins (often ₹1–2 lakh+ per Nifty lot).
3Diagram
Max profit
₹13,000
Max loss
Unlimited
Breakeven
₹25,200
4Quick revision
- Receives premium, takes obligation.
- Short call = unlimited risk.
- Needs high margin.
5Knowledge check
Q1. Max profit of an option seller?Show answer
The premium received.
Q2. Max loss of a short call?Show answer
Unlimited.
Q3. Why is selling margin high?Show answer
Because of the large potential losses.