Definition of Buy-Write
Option buying means buying a put option and option writing means selling a put option. Option buying has limited risk where as option writing has as much risk as future.
OPTION BUYING V/S OPTION WRITING
1.Buying options - limited loss, unlimited profits where as Writing options - limited profits, unlimited losses
2.Option writers have a significantly higher chance of making money as compared to option buyers......3. The profits are limited/ known in advance but investments are high. Conversely, the buyer of an option has limited losses but profit is unknown.
4. Option writers trade the time decay and volatility; the extent the market moves is secondary! On the contrary, the option buyer has a good chance of earning only if the market shows fast moves.
5. While most investors are driven by greed and high profit targets, option writers are satisfied with relatively low returns.
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