Part 4 Learn Institutional Trading

Two Sides of an Option Trade

Every option contract involves two parties:

a. Option Buyer

Pays a premium (price of the option)

Limited risk (only the premium paid)

Unlimited profit potential in some cases

b. Option Seller (Writer)

Receives the premium

Limited profit potential

Higher risk (sometimes unlimited)

Option buyers purchase potential, while sellers sell that potential in exchange for premium income.