Option Buying vs Selling in Trading

   

Writing and buying an option depends upon the market condition. In this article, we will talk about the differences between the option Buying vs Selling,

You need to understand the rhythm of the market. First, The market gives you moves, then it gets volatile and then goes sideways so that everyone can make a profit,

It is a kind of cycle to keep the balance of the market.

 

Differences Between Option Buyer vs Seller,

These are the conditions which are best for the option writer

Highly Volatile Market

A volatile market is always better for option writers because option seller or writer has the advantage of time decay. Whenever the premium is high in the market, If you write any put option, and at the same, if you buy any call option, then the writing option will give you more profit than the option buying.

And if the market goes against you, option buying will instantly show you almost 50-60% loss, but in terms of option writing, it will be less.

Also, when there is a VIX high in the market, it is the best time for an option to write or sell. All of this knowledge comes from my personal experience.

 

Sideways Market

When the call and put option hit the stop loss on both sides, it means a sideways market. Also, the option seller has the advantage of Time Decay.

If the market stays in the range or goes in their direction, the option writer will make money until and unless it goes against them. You might have heard that option writer has a high winning probability.

As an option buyer, scalping will be the better option in the sideways market, but only if you are a seasoned professional.

 

High ViX

VIX stands for Volatility Index, and it is responsible for option pricing in the stock market. When the Vix is high, the market shows volatility, which is best if you are an option writer.

These are the conditions which are best for an option buyer 

Option Buyer needs Momentum

Option buying is all about movement. In case the market gets stuck, you will lose your money. If you're an option buyer, then look for great opportunities.

Low Vix

Low Vix is best for option buyers. In this condition, you can think up to achieve a significant target because the option seller has no other option. Whenever the Vix is low, it will give you a bigger target.

When the option writer adjusts their positions, it creates a movement.

Conclusion:-

In the end, you could be an option buyer or seller according to the market conditions and sentiments.