Hi, I am learning options. But I am really confused at this moment. I read that option writer's profit is limited and loss is unlimited. But they seems can write many options and make a profit. Is it true? If that is true, then I just can do the same. Write options on many stocks. But what is the possible profit rate? Hope someone can help. Thank you in advance.
1) The option writer's profit is limited to the option premium collected, unless the position is hedged with other option(s) or the underlying instrument. 2) With most options contracts, the maximum risk of a naked short-call option is "infinite". The maximum risk of a naked short-put is equal to (Strike Price minus Premium), a finite number......unless either option is hedged with other option(s) or the underlying instrument. 3) If you're going to write options on many stocks at one time, try to pick issues that aren't too correlated to one another.
advice is simple - don't start unlimited risk strategies while calling yourself newbie. No one can cover unlimited loss with limited gain.