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WriterA person who makes an opening sale of an option contract. Upon notification of exercise by the option holder (the buyer), the writer is obliged to deliver or take delivery of the underlying instrument (for example, shares, commodities etc).Similar MatchesOption writerOption writerThe initial 'seller' of an option. He has to fulfil the terms of the option contract if the holder choose to exercise it. So if the holder exercises a call option to buy some shares, the option writer has to deliver the shares. Note that the option writer has an obligation, but no rights. It is not up to him whether the option is exercised. UnderwriterUnderwriterA firm, usually an investment bank, that buys an issue of securities from a company and resells it to investors. In general, A party that guarantees the proceeds to the firm from a security sale, thereby in effect taking ownership of the securities. Managing underwriterManaging underwriterThe leading firm in an underwriting group, which originates the deal and acts as an agent for the group. Naked writerNaked writerSee Uncovered call writing and Uncovered put writing. UnderwriterUnderwriterA financial institution which, in return for a fee or commission, agrees to purchase unsold shares in a new issue, if the issue is not fully subscribed.From the company's point of view, having its new issue underwritten is a form of insurance. It means that if it has priced an issue too high and the market shuns it, the company can still be sure that it will get money from the new issue.Of course, security comes at a price. Underwriters charge a fee for the back-up they provide. If the new issue is very popular, it will pocket that fee and make a handsome profit. Occasionally, they get badly burned. New issues underwritten immediately before the 1987 stock market crash lost a lot of money.Sometimes companies do a rights issue at a deep discount to reduce the underwriting fees. Further SuggestionsRatio writerUnderwriters discount Option writer Lead underwriter Covered writer |
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