Option Buying vs Selling – Which is Best?
When stepping into the world of trading, the question of “Option Buying vs Selling” is one of the first you’ll encounter. Many beginners lose money early due to lack of knowledge or experience. As time passes, you’ll realize that trading is a game of probability—and that one small word makes all the difference.
🔍 Why Focus on Probability in Option Trading?
The word PROBABILITY is the biggest reason why over 90% of traders fail to make consistent money. Understanding this concept is the key to making informed decisions—especially when comparing option buying and option selling.
Before we decide which is better, let’s dive into the key differences between option buying vs selling:
📊 Option Buying vs Selling: Key Differences
| Feature | Option Buying | Option Selling |
|---|---|---|
| ✅ Profit Potential | Unlimited (Call), High (Put) | Limited (to premium received) |
| ❌ Risk | Limited (premium paid) | Unlimited (theoretically) |
| 💰 Capital Needed | Low | High (margin required) |
| ⏳ Time Decay (Theta) | Works against you | Works in favor of you |
| 📈 Probability of Profit | Lower (~30-40%) | Higher (~60-70%) |
| 🧾 Ideal for | Small capital, directional bets | Experienced traders, neutral strategies |
💡 Realistic Example: Bullish Market View
Let’s assume you have a bullish view on the market. Here’s how it plays out:
Performance: Option Buyer vs Seller in Different Conditions
| Market Condition | Option Buyer 💸 | Option Seller 💰 |
|---|---|---|
| 📉 Goes Against View | ❌ Full loss (premium lost) | ✅ Full profit (premium earned) |
| 🔁 Sideways Market | ❌ Time decay causes loss | ✅ Partial/full profit due to premium decay |
| 📈 Goes in Favor | ✅ Profitable only if move is fast & strong | ✅ Profitable even with slow/moderate moves |
As you can see, option sellers have a winning probability of over 70%, while option buyers win in only about 30% of cases.
🧠 Myth Busting: “Selling Options is Expensive”
Many traders believe that selling options requires ₹1 lakh or more in capital. But that’s not entirely true. You can use hedging strategies such as bull spreads or bear spreads, where buying an OTM option reduces your margin requirements significantly.
📌 Why Most Pro Traders Prefer Option Selling
Most prop traders and institutional investors rely on option selling, not because they want unlimited profits, but because the odds are in their favor. Selling options is like being the house in a casino—you win more often, even if your profit per trade is limited.
—————————————————————————————
🔗 Resources & Further Reading:
✅ Final Thoughts: Which is Best?
If you’re just starting with a small capital and looking to learn, option buying is low risk and educational. But if you’re serious about long-term consistency and understand how to manage risk, option selling gives you the edge in terms of probability and strategy.
Remember: in the market, being right isn’t enough—you have to play the probabilities smartly.
✌️ See You in the Next Blog!
Leave a Reply