: Theoretically unlimited for call buyers, as there’s no ceiling on how high a stock price can go.
At its simplest, buying an option is like purchasing a lottery ticket with a better shot at winning, while selling an option is like acting as the casino . Buyers pay a premium for the chance at a huge payout, whereas sellers collect that premium upfront and hope nothing exciting happens. Buying Options (Long Premium) selling options vs buying options
: Your risk is strictly capped at the premium you paid . Even if the stock crashes to zero, you can't lose more than your initial investment. : Theoretically unlimited for call buyers, as there’s
Selling an option (also called "writing") means you take on the to trade if the buyer chooses to exercise their right. Buying Options (Long Premium) : Your risk is
Buying an option (a call if you're bullish or a put if you're bearish) gives you the , but not the obligation, to trade a stock at a fixed price.
: You are Short Theta (time is your enemy) and Long Gamma (you benefit from explosive price moves). Selling Options (Short Premium)
: Generally lower (less than 50%) . For a buyer to win, the stock must move significantly and quickly in the right direction to overcome the cost of the premium and time decay.