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Part 1 Trading Masterclass

69
Risks & Rewards in Option Trading

Option trading can be thrilling, but it’s not without risks.

For Buyers:

Maximum loss = premium paid.

Maximum profit = potentially unlimited (for calls) or huge (for puts).

For Sellers:

Maximum gain = premium received.

Maximum loss = unlimited (for calls) or very large (for puts).

Risks also come from:

Time decay (options lose value daily).

Volatility crush (sudden drop in implied volatility can reduce premiums).

Liquidity issues (wide bid-ask spreads can hurt execution).

That’s why risk management (stop-losses, proper sizing, hedging) is crucial.

Option Trading vs Stock Trading

Stocks = Ownership, long-term growth, dividends.

Options = Contracts, leverage, flexible strategies.

Stocks = Simpler, but capital-intensive.

Options = Complex, but require less capital and offer hedging.

For example:

Buying 100 shares of Reliance at ₹2500 = ₹2,50,000.

Buying 1 call option of Reliance at ₹100 premium with lot size 250 = only ₹25,000.
This leverage makes options attractive—but also riskier.

כתב ויתור

המידע והפרסומים אינם אמורים להיות, ואינם מהווים, עצות פיננסיות, השקעות, מסחר או סוגים אחרים של עצות או המלצות שסופקו או מאושרים על ידי TradingView. קרא עוד בתנאים וההגבלות.