Question: When a trader writes a cash - settled call option, they agree to pay their counterparty Max ( 0 , ST - K ) at

When a trader writes a cash

-

settled call option, they agree to pay their counterparty

Max

(0,

-

)

at option maturity. Thus, the trader never expects to receive a payment at maturity and may have to make a payment at maturity. Therefore, the best the trader can ever do is to pay nothing. Why would the trader ever agree to such an arrangement?

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