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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 cashsettled call option, they agree to pay their counterparty
Max ST K 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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