Bajaj Finance Limited
Education

Part 6 Institutional Trading

66
enefits and Risks of Option Trading

Benefits:

Limited risk for buyers (only the premium is at risk).

High leverage with a small capital requirement.

Can be used for hedging against stock price movements.

Risks:

Option sellers face unlimited risk if the market moves against them.

Time decay reduces option value as expiry approaches.

Requires good understanding of volatility and market trends.

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