The risk of an Options Writer is unlimited whereas his / her gains
are limited to the Premiums earned.
When an uncovered call is exercised for physical delivery, the
call writer will have to purchase the underlying asset & his / her loss
will be the excess of the purchase price over the exercise price of the call
reduced by the premium received for writing the call.
The writer of a put option bears a risk of loss if the value of
the underlying asset declines below the exercise price.
The writer of a put bears the risk of a decline in the price of
the underlying asset potentially to zero.
When put option holder exercises his / her option in the falling
market, the put writer is bound to purchase the underlying at strike price,
even if the underlying is otherwise available in the spot at lower price.
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