Nov 9, 2008
Option writers have a significantly higher chance of making money as compared to option buyers.
Option writing is a profitable and interesting concept. It is interesting because the profits are limited/ known in advance but investments are high. Conversely, the buyer of an option has limited losses but profit is unknown.
So why would anyone write options? The answer is time decay.
Option writers trade the time decay and volatility; the extent the market moves is secondary! On the contrary, the option buyer has a good chance of earning only if the market shows fast moves.
Option writing is a profitable and interesting concept. It is interesting because the profits are limited/ known in advance but investments are high. Conversely, the buyer of an option has limited losses but profit is unknown.
So why would anyone write options? The answer is time decay.
Option writers trade the time decay and volatility; the extent the market moves is secondary! On the contrary, the option buyer has a good chance of earning only if the market shows fast moves.
