Buying vs. Selling Options: Which Is Riskier? - Investopedia
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)
: 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.
: You are Short Theta (time is your enemy) and Long Gamma (you benefit from explosive price moves). Selling Options (Short Premium)
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.
Adam's new book, "Irrational Together: The Social Forces That Invisibly Shape Our Economic Behavior" (University of Chicago Press) Investopedia Buy or Sell Options? Which Is Better?
: 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.
: Theoretically unlimited for call buyers, as there’s no ceiling on how high a stock price can go.