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Preetesh Ghatke
New to stock market.
Asked a question 9 months ago

Why does option selling require more money?

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One of the reason may be because Options sellers are more profitable 😂 

Because selling contains unlimited loss and limited profit. 

Option selling requires more money than option buying because of safety reasons. What if that premium you sold goes up to 100 points or more. This happens because while we buy options, we only pay for the premium price, and while we sell an option, we pay extra because the profit we generate by options selling is only the premium price. I shared my knowledge what I know about option selling.

Hi Preetesh, as others have already pointed out, it has got to do with the potential for loss. The maximum loss that an option buyer could suffer is limited to the extent of premium paid upfront. On the other hand, the maximum loss that an option seller could suffer is potentially unlimited. The more the underlying price moves against your short option position, the larger and larger could your losses become. Hence, to safeguard against the risk of the seller defaulting in case he or she suffers a loss, option selling requires high margins.

I am a options buyer btw... I would like to start selling options but the only reason i am not able to sell is the margin required is more. Hence i was scrolling down the community and found this question and helped me a lot. Even I too had the same Doubt. Thank you Fyers for providing the answer.

You can Hedge your position to reduce the margin requirement...

Because out of 100%  Buyers have 33.3% of probability of making money and the Sellers has probability of making  77.7% of money!