: 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.
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
Selling an option (also called "writing") means you take on the to trade if the buyer chooses to exercise their right. : Your risk is strictly capped at the premium you paid
: You are Short Theta (time is your enemy) and Long Gamma (you benefit from explosive price moves). Selling Options (Short Premium) Buyers pay a premium for the chance at
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?
: Theoretically unlimited for call buyers, as there’s no ceiling on how high a stock price can go.
: 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.