One reason that writing options can be a viable and profitable investment strategy is that
A)the option writer collects the quarterly dividends.
B)most options expire unexercised.
C)an option writer determines when the option is exercised.
D)an option writer can exercise the option to avoid a potential loss.

Question

Quizplus · Accepted Answer

When a writer sells an option, they collect the premium from the buyer. If the option expires unexercised, the writer gets to keep the premium as profit. This can be a profitable strategy if the writer has a strong belief about the market direction and the option expires with no exercise. However, it is important to note that writing options carries significant risks, including the potential for unlimited losses if the underlying asset moves significantly against the writer.

One Reason That Writing Options Can Be a Viable and Profitable