SIE (Securities Industry Essentials) Practice Exam

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The writer of an option contract has what kind of option position?

  1. A long option position

  2. A neutral option position

  3. A balanced option position

  4. A short option position

The correct answer is: A short option position

A short option position refers to the writer of an option contract, meaning they are obligated to fulfill the terms of the contract if the buyer chooses to exercise it. This is in contrast to a long option position, where the buyer holds the right to exercise the contract. A neutral option position does not exist, as it is not a commonly used term in the context of options trading. A balanced option position also does not accurately describe the role of the writer, as they are not in a balanced or neutral position - they are obligated to fulfill the terms of the contract.

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