{"id":36990,"date":"2015-07-07T13:48:21","date_gmt":"2015-07-07T13:48:21","guid":{"rendered":"http:\/\/vskills.in\/certification\/blog\/?p=36990"},"modified":"2024-04-03T13:22:07","modified_gmt":"2024-04-03T07:52:07","slug":"understanding-the-market-participants-put-writers","status":"publish","type":"post","link":"https:\/\/www.vskills.in\/certification\/blog\/understanding-the-market-participants-put-writers\/","title":{"rendered":"Understanding the market participants- put writers"},"content":{"rendered":"

\"Understanding<\/a><\/p>\n

One of the market participants are the put writers. They are generally traders who prefer to make risky trades and have the potential to take a large amount of downside risk. They are bulls and expect the market to go high. So let\u2019s try to delve into what calculations go on in the mind of the call writer.
\nCall writers anticipate bullish movement, and thus have the options to purchase calls, securities or write puts. Suppose they were to buy securities, then they would take up unlimited risk without any added incentive, i.e. leverage. Thus we can more or less rule out this option. Second option that is available to them is buying calls, which limits the risk. Although the buyers limit the risk when they purchase calls, they do have to pay an unconditional payment to the writers, and this won\u2019t be recoverable in any case. This makes them apprehensive towards the instrument as a bearish or even flattish market would result in a loss, as they would have to pay the premiums regardless, if the market doesn\u2019t show much movement, it would only result in losses to the extent of the difference in the movement above the strike price and the premium, ceteris paribus.
\nSo the option that is left is that of writing puts. Since they have a bullish stance, it makes sense to enter into writing puts, as an increase in the market value would only render their instrument un-exercisable, thus making them profits to the tune of the premiums that they stand to receive. Although they are exposed to much risk, their gain solace in the fact that if the market were to stay flat, they would stand a chance to gain from the time decay or theta loss in the put premium.
\nWe have almost gained enough insight to begin with the complicated concept of the \u2018Option Greeks\u2019, and we must begin that vast topic soon, and topics that are vital to their understanding will be covered alongside.<\/p>\n

Click here for government certification in Accounting, Banking & Finance<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

One of the market participants are the put writers. They are generally traders who prefer to make risky trades and have the potential to take a large amount of downside risk. They are bulls and expect the market to go high. So let\u2019s try to delve into what calculations go on in the mind of…<\/p>\n","protected":false},"author":1109,"featured_media":37060,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_joinchat":[],"footnotes":""},"categories":[1519],"tags":[2044,2718,1760,1124],"class_list":["post-36990","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-accounting-banking-and-finance","tag-derivatives","tag-options","tag-stock-markets","tag-stocks"],"acf":[],"yoast_head":"\nUnderstanding the market participants- put writers - Vskills Blog<\/title>\n<meta name=\"description\" content=\"An attempt to understand the market participants: the put writer. 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