Here are the 4 advantages of option selling over option buying:
Higher Probability of Success:
When selling options, traders can benefit from the time decay of options premiums, as options lose value as they approach expiration. This means that, all other things being equal, option sellers have a higher probability of success than option buyers.
Generates Income:
Option selling can generate income for traders. When selling options, traders receive the premium as income upfront. If the option expires worthless, the trader keeps the premium as profit.
Flexibility:
Option selling provides traders with greater flexibility. Traders can choose from a variety of options selling strategies, including covered calls, cash-secured puts, credit spreads, and iron condors, among others. This allows traders to tailor their strategies to their specific trading goals and risk tolerance.
Hedge against Market Volatility:
Option selling can be used as a hedge against market volatility. When markets are volatile, option premiums tend to be higher, providing traders with the opportunity to generate higher income from selling options. Additionally, option selling strategies like credit spreads can limit the potential losses from market movements.
