The option trading risks pertaining to options sellers are:
1. Options sold may be exercised at anytime before expiration.
2. Covered Call traders forgo the right to profit when the underlying stock rises above the strike price of the call options sold and continues to risk a loss due to a decline in the underlying stock.
3. Writers of Naked Call Write risk unlimited losses if the underlying stock rises.
4. Writers of Naked Put Write risk unlimited losses if the underlying stock drops.
5. Writers of call options can lose more money than a short seller of that stock on the same rise on that underlying stock. This is an example of how the leverage in options can work against the option trader.
6. Call options can be exercised outside of market hourssuch that effective remedy actions cannot be performed by the writer of those options.
1. Options sold may be exercised at anytime before expiration.
2. Covered Call traders forgo the right to profit when the underlying stock rises above the strike price of the call options sold and continues to risk a loss due to a decline in the underlying stock.
3. Writers of Naked Call Write risk unlimited losses if the underlying stock rises.
4. Writers of Naked Put Write risk unlimited losses if the underlying stock drops.
5. Writers of call options can lose more money than a short seller of that stock on the same rise on that underlying stock. This is an example of how the leverage in options can work against the option trader.
6. Call options can be exercised outside of market hourssuch that effective remedy actions cannot be performed by the writer of those options.