Profit of Options writer when option expired below Strike price

General
1

Hi,

I read people saying “Options writer’s profit is limited to the premium.”

Also I see people say, “Options buyer’s premium will become 0 when expired.”

These two look contradictory. If the option contract is written at 100 with strike price of 140, What will be the income of the options writer when the options expire with the price 139.95?

Thanks.

2

Nothing contradictory. The premium lost by buyer is writer’s profit. In above example, writer gets to keep full premium he has received. (Provided it is call option)

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3

I meant to ask, What happens to that 39.95?
When the price was 100, writer sold the option for 40.
Now he got the stock price increased a 39.95 too.
So the writer enjoys the profit of 79.95 for the initial 100 investment??

4

Leave ur example, its vovelling, take another example, nifty futures is at 7900, as u know there are two options calls and puts, suppose u sold call option of 7900 strike price at 140 rs, so thats it if nifty does not cross 7900 , u will keep whole the premium, even if nifty cross 7900 , as u have premium of 140 rs, u will only start getting loss if nifty cross 8040, same is put but with caveat that in call u does not want nifty increase a specific strike and in puts u does not want nifty to fall below a specific strike price, rest is same