Buyer vs Seller

Описание: Chapter 10 explains options trading as a zero-sum game between buyers and sellers, highlighting how risk, reward, probability, and time differ fundamentally between the two sides.

Buyer vs. Seller Framework:
Every option trade has two opposing participants. Buyers seek large price moves, while sellers profit by betting that such moves will not occur.

Option Seller’s Edge:
Sellers are compared to insurance companies—they collect premiums consistently and operate with a statistical advantage, as most options expire worthless.

High probability of profit (~67%)

Limited profit (premium received)

Substantial or unlimited risk

Positive Theta (time decay works in their favor)

High capital and margin requirement

Option Buyer’s Profile:
Buyers pay a premium for the chance of a large move.

Limited risk (premium paid)

Unlimited or high profit potential

Lower probability of profit (~33%)

Negative Theta (time decay hurts)

Low capital requirement

Practical Market Reality:

Option selling is typically dominated by institutions and well-capitalized, experienced traders who can absorb drawdowns.

Option buying attracts retail traders due to low entry cost, but success requires high-conviction, timely trades to overcome time decay and premium cost.

Overall Conclusion:
Long-term success in options trading comes from:

Understanding the buyer–seller relationship

Aligning strategies with market conditions

Managing risk through position sizing and defined losses

Accepting probability, not certainty, as the foundation of trading decisions

Core takeaway:
This chapter clarifies that options trading is not about being right often, but about choosing which side of probability, risk, and time you want to play—and managing it with discipline.