Option Buying & Selling - Advantages & Disadvantaged Explained!

Hello, I'm PR Sunday. In this video I am going to talk about the difference between

option

s buyer and seller. There are myths out there, so I hope to clear up some important things in this video. Every time people talk about the

option

s seller, they say it's unlimited. risk just for your information you have unlimited risks everywhere in your life every day I turn on the television I find that some people die by accident so let's say that leaving the house is an unlimited risk, therefore we are not going to work, no Don't go studying, no that's not the case, somehow I feel like this unlimited risk has been magnified for the options seller.

In this video I'm going to explain what are the

advantages

of options that are minor on option buyers, what are the top three

advantages

that people think. About option buyers, the number one option buyer pays a little premium money, while the option seller has to pay a huge margin of money. The number 2 option buyer carries limited risk, his risk is limited to the premium paid, while the option seller carries unlimited risk. The number 3 option buyer carries unlimited risk. reward, while the option seller offers a limited reward now, basically, if all three things are favorable for the option buyers, logically everyone should be a buyer, but you find that for every contract, but there is a contract that is being resolved, Who are those people right now?

Every now and then I would like to bring something very interesting: Do you know that nifty is traded in Singapore, also popularly known as sjx nifty, where the volume is almost equal to the volume of India nifty? It's very liquid in Singapore, but you know? that not even a single option contract is traded in Singapore while ninety percent of the trading volume in India comes from options why options are not traded in Singapore very simple there are no buyers everyone there is a seller no one is a buyer when there is There is no one to link to, naturally the exchange will not take place, as everyone knows, SDX nifty is dominated by one phrase, so there are no buyers, okay, let's go back to these three points, these three things that are favorable for the options buyer, everyone knows it now.

I'm going to tell you what you don't know, number one: the buyer of an option pays only the premium money, say 2000 or 3000 rupees, while the seller of the option will not pay a big spread of money, maybe eighty thousand. ninety thousand rupees, but there is a big difference. An options seller does not need to pay the cash to the exchange if he has assets like stocks or mutual funds or bank deposits or bank collateral so that those things can be given as collateral so that he does not pay a single rupee from his pocket, while the option buyer although he pays only 2000 or 3000 rupees he has to pay all cash that's why i always say return is infinite for an option seller as there is no cash involved whatever the money .

What it does is an additional return on top of the guarantee on it, so this is a big advantage for the options seller. The second option buyer has limited risk. Actually, this is how it looks, if you have five thousand rupees, you put five thousand rupees on the table. buy an option if it goes to zero, there are two ways to look at it: one, you lost all your capital and you can see that UJ lost only five thousand rupees, which is rarely the option seller's direction, they always say that you know it will ruin your account one day will go bankrupt in one day let's say if my net worth is 20 crores and I kept 15 crores in Assam other assets I am playing only with fire or in the stock market I am a seller even if that fire is returns zero I'm not going to declare bankruptcy yet, so a person who has five thousand and puts the whole five thousand on the table, okay, they say you're not losing all your capital, they say your loss is limited, whereas a The seller who puts in some money always says that he loses all the capital, although in theory it is a limited permit by losing 5,000 many times over and over again, so a person can go bankrupt.

Secondly, if a buyer says nifty will go over 12,500, a seller says it won't go over 12,500, then what is the probability? of winning the probability of winning for the options buyer is less than 20%, that is because there are five scenarios in which the market can collapse violently or the market can fall a little our market can go sideways our market can go up slightly our market can move violently up so the buyer will make money only if the markets move violently up with all the strength remaining in a yoshi if we are losing so the probability of bias meaning is around 20% only, while the probability of the seller winning is very, very high, so even if you have unlimited. risk but earning is likely to be very very high and the third buyer of an option has unlimited profits so theoretically it is not correct practically tell me if the Nifty will reach 1 lakh rupees and one lakh point at the end of one month.

It's not willing if T goes to zero, so Nifty makes only a few hundred points up and down, so it's not a big move and I'll give you an interesting look at the psychology, as a buyer, let's say for options 50 rupees reaches 100 rupees, so it has already doubled. this money but what will it do, it booked the profits, it booked the profits and then it will go to 200 so we have to book the profits which is a very big dilemma for option buyers and they don't book the profits in hundred rupees, then it goes to zero, you must have seen it, especially on expiration days, 10 rupees option will go to 50 rupees, after 50 rupees it will go to zero, please, so that option buyer has unlimited reward which affects the psychology, where to book profit while for options seller. although his profits are limited and he knows that that is his maximum profit, so greed never comes into play, so if there is a topless hit or standing in front of his head, then this is the third.

Now I am giving you a simple analogy. said per year, if you think you are investing limited capital, you have limited risk and unlimited reward, although it says that the limited premium is still 2000 3000 thousand limited risk, it is still two thousand three thousand losses, although unlimited reward you can get 5,000 10,000 out of fifty thousand at most why don't you buy a lottery ticket that costs only 10 rupees is twenty rupees your bonus is ten rupees 20 rupees the maximum you lose is only ten ten rupees is twenty rupees the reward is coming? It can also be fifty as a color, but people don't do that, why don't they do it because they know that the probability of winning is very, very, very low.

I tell you with limited capital if you want to obtain unlimited profits. I repeat. With limited capital if you want to get unlimited profits there are only two possibilities: You give me ten thousand rupees today. I can arrange to give you ten million rupees tomorrow. It's very simple: you go to the black market, buy a revolver, go to a bank manager, put the gun to his head, ask him for 10 million rupees and he will give you, but what is the risk if you get caught for the rest of your life? ? You will be in jail, so with limited risk if you want to make unlimited profits, there are only two things.

The risk associated will be very, very, very high or the probability associated is very, very, very low, so bank robbery is an example where the risk is very high. Buying a lottery ticket is an example where the probability is very low, so remember your money or its scale can only make more money for you, so don't believe in the hypothesis of limited risk and unlimited reward. , so the probability of option seller meaning is always high, let me ask you a simple question, go to any other field, let's say there. They are two people who work in the same field a and B B is much richer than a so you will always feel inferior tomorrow if you have money will you dare to open a telecommunications company in India against Alain's you know you won't do it because what because I know that the promoter of Retiro has much more money than you, so the probability of you winning in a business is very, very low if you are fighting against a rich person, but only in the stock market people with very , very little money they think they can. fight with the option seller who has a very good amount of money and the option buyer feels superior to the option seller.

I'm NOT saying that the option buyer can't make money, but over a longer period of time, making money consistently by

buying

options is very, very, very difficult. I'm NOT saying it's not possible, but you need extraordinary scale and while to sell options you don't need extraordinary skills, you just need to have extraordinary capital, that's the basic learning point here, so if you have good capital, be a salesman. and if you have very low capital and if you think you have an extraordinary ability to judge the market, then you become Empire. Thanks for watching, continue watching our channel.

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