Part 8 Trading Master Class

Option Buyer vs Option Seller
Option Buyer

Pays premium

Risk is limited to premium

Profit potential is unlimited (for call) or large (for put)

Needs a strong directional move

Time decay works against the buyer

Option Seller

Receives premium

Risk can be unlimited (if market moves sharply)

Profit is limited to premium received

Benefits from sideways market

Time decay works in seller’s favour

Option sellers usually need more capital because of higher risk.