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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 writerSee: Option seller Naked writerNaked writerSee Uncovered call writing and Uncovered put writing. Underwriters discountUnderwriters discountSee: Gross spread 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. Ratio writerRatio writerAn option writer who does not own the number of shares required to cover the call options he or she writes. Further SuggestionsLead underwriterCovered writer Underwriter Managing underwriter option writer |
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