The writer or seller of an option is exposed to greater risk than the buyer of the option.

Question

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The writer or seller of an option has the obligation to sell or buy the underlying asset at the specified price (strike price) and time (expiration date) if the buyer chooses to exercise the option. Therefore, the writer is exposed to greater risk because they have a potential obligation to buy or sell the asset at an unfavorable price, while the buyer has the right but not the obligation to exercise the option.

The Writer or Seller of an Option Is Exposed to Greater