Options Buying vs Options Selling- Options are considered attractive trading vehicle used by stock market participants. Today, we will discuss the details of buying and selling options, and the underlying goal, maximum reward, and maximum risk of each trading strategy.
If You want to get profits from a falling asset viz. Index OR Stock, you can purchase Put Options also known as option buying. When the underlying asset fall more, value of put will increase. Also Puts are utilised for hedging long positions in assets to protect downside. When stock in holding fall then put will reap profits cutting losses.
It appears reverse of what we do in option buying but the major difference lies in risk, reward as well as margin requirements. Mostly Puts are sold to take premium available expecting that asset has taken some major support and it may not fall from here, this is what happens in option selling. So When Asset rises from there or even stays there, we eat premium and earn expected profit.