Buying Options v/s Selling Options!

Irrespective of the options strategy you trade, it will be typically a combination of two basic options – Buying/Selling of Call and Puts!!

If you compare it with traditional ‘buying and holding’, the way Options work is bit unique.

How?

Well, Options traders can be broadly divided into two main categories – Net Buyer and Net Seller!!

The quickest explanation of that is –

If you are ‘Paying’ premium to open a trade (no matter if it is a single leg or complex multi-leg trade) – You are a ‘Net Buyer’

Just opposite – If you are ‘Receiving’ premium to open a trade (no matter if it is a single leg or complex multi-leg trade) – You are a ‘Net Seller’

So what should you go for?

Although there is no straight answer to this, generally speaking, most savvy traders are ‘Net Sellers’ (me including 🙂 )

The reason for that is – as a seller, you have an extra edge.. which is ‘time decay’!

Time works in your favor when you are a net seller!

So even if UL is not moving much in your direction, you get benefited by ‘time decay’

As a seller, you don’t really bet on ‘where the stock will go’, it’s more of ‘where the stock will NOT go’.. and that’s why your POP (probability of profit) is higher!

So being a net seller with defined risk as per your risk appetite is the way to go for consistency in long term.

If you are interested in learning more on how to trade options like a pro, you can contact us – info@bullishoption.com