Question

It is riskier to buy an option than to write an option. True or false?

It is riskier to buy an option than to write an option.

True or false?

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Answer #1

False.

Buying any Option gives you the right to exercise to exercise or not and if the Price get unfavorable, then the max loss is the Premium paid but the Put Option Writer has obligation to buy the stock if the option holder want to execute it and he is exposed to higher losses with limited profits potential i.e. maximum a writer can earn is Premium.

So, A writer is more exposed to higher losses thus higher risk.

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