Short Options Position - Definition
To have a "Short Options Position" means to be the counterparty to an options trader who buys options contracts.
Short Options Position - Introduction
Being "Short" an options position is exactly the same as being "short" a stock or being "short" a futures contract and is opposite to a "Long Options Position". However, many beginners to options trading often misunderstand being "Short" as betting to downside because being short a stock or being short a futures contract means you are betting to downside on a bearish outlook (Read about the Six Directional Outlooks In Options Trading). This isn't necessarily true in options trading as being "Short" an options contract can also be a bet to upside depending on what options position is being put on.
What Does It Mean To Be Short In The Financial Market?
The terms "Long" and "Short" aren't unique to options trading. They are terms used in the financial markets across every single asset class. Being "Long" an asset class doesn't mean you are holding it for the long term neither does being "Short" mean you are only holding it for the short term. "Long" and "Short" in the financial markets refer to whether you are the "Buyer/Owner" or "Seller/Borrower" of a financial instrument. So when you are long a stock, you are actually the buyer and owner of the stock. When you are short a stock, you are actually the seller or borrower of a stock (borrowing in order to sell when you don't own the stock yet). This same logic applies to options trading.
What Does It Mean To Be Short an Options Contract?
To be "Short" an options contract means to be the "Seller/Producer" of an options contract. When you go "Short" an options contract, you are actually producing an options contract, or writing up a whole new options contract (this is why being short an option is also known as "Writing" an option), for sale to an options buyer in the options market. If buying options is a directional bet on the direction of the underlying stock, then being "Short" or "Writing" an option makes you the bookmaker to that bet, selling a "lottery ticket" for a small price and keeping the win if the bet didn't work out at the buyer expected. In order to be short an options contract, all you have to do is to use the "Sell To Open" order, which means to open a new options position by selling rather than buying.
When you are "Short" a call option, you give the buyer the rights to buy from you the underlying stock at the strike price anytime prior to expiration and benefit from the premium received if the price of the underlying stock goes downwards instead of upwards.
When you are "Short" a put option, you give the buyer the rights to sell you the underlying stock at the strike price anytime prior to expiration and benefit from the premium recieved if the price of the underlying stock goes upwards.
As you can see above, depending on whether you are short a call option or put option, you could actually be making an upside or downside bet. As such, being "Short" in options trading does not necessarily suggest an downside bet like in stock trading or futures trading.
What Does It Mean To Be Short an Options Position?
Other than being "Short" a single options contract, you can also be "Short" an options position or options strategy consisting of a few different options on the same underlying stock. Yes, options contracts can be combined into many different options strategies. Within an options strategy, there could be both long and short options contracts combined to produce a specific payoff profile. Examples are the Straddle, consisting of BOTH long call and long put, and the Bull Call Spread, consisting of a long call and a short call.
In such situations, all the different options making up the options position or options strategy, are treated as a whole, just like how wheels, engine and chassis put together is known as a "Car". So being "Short" a particular options strategy such as the Bull Call Spread, means that you are selling ownership of a Bull Call Spread which means trading both a short call and a long call. As such, being "Short" an options position doesn't necessarily mean you are holding only "Short" options contracts but that you are selling ownership of a group of various long and short options contracts working together as a whole.
What Does It Mean To Be Short an Options Greek?
Other than being "Short" a single options contract or an options position, you can also be "Short" individual options greeks. Options greeks are the main mathematical variables that define how the price of an options contract changes. The 5 main options greeks are: Delta, Gamma, Vega, Theta and Rho.
Being "Short" an options greek is to own a position with that specific options greek in its opposite state. For instance, the opposite state of Delta, Gamma, Vega and Rho are negative, as such, to be short delta means to own a position with negative delta, to be short gamma means to own a position with negative gamma, to be short vega means to own a position with negative vega and to be short rho is to own a position with negative rho. However, for Theta where the default state is negative, to be short theta means to own a position with a positive theta.