Options: Buying vs Selling — Key Strategic Differences

In the derivatives market, options are among the most popular instruments for active traders. However, buying and selling options are two fundamentally different approaches that require different skills and risk understanding. Let’s start by analyzing the main characteristics that distinguish these two positions.

Right and Obligation: The Fundamental Polarity of Options

When trading options, you deal with two opposing positions. An option is a type of derivative that grants its holder the right (but not the obligation) to buy or sell the underlying asset at a predetermined price at a specific point in time.

The buyer of an option pays a premium—that is, the initial cost of the contract. For this amount, they gain the right to exercise the option in the future and potentially profit, or to decline it if it’s unprofitable. Their maximum loss is limited to the premium paid.

The seller of an option, on the other hand, assumes an obligation. If the buyer decides to exercise their contract, the seller must fulfill the deal—buy or sell the assets at the agreed-upon price. In exchange for this risk, the seller receives the premium from the buyer. However, their maximum losses can significantly exceed the received premium.

Profitability and Risk: Scenario Table

Understanding the profit and loss profile is critical for any options trader. Here’s how it looks depending on the type of option:

For Call Options:

• Buyer: unlimited maximum profit, maximum loss = premium paid
• Seller: maximum profit = premium received, unlimited maximum loss

For Put Options:

• Buyer: maximum profit = strike price minus premium, maximum loss = premium paid
• Seller: maximum profit = premium received, maximum loss = strike price minus premium

From this comparison, an important conclusion follows: buying an option offers risk limited to the premium, but the profit potential can be substantial (for call options) or defined (for put options). Selling, however, opens up greater risk in exchange for a guaranteed income from the premium.

Calculating Actual Profit: Considering Commissions

When an option reaches expiration, the actual result depends not only on the asset’s price but also on trading costs. On the Bybit platform, your profit or loss is affected by the following commissions:

• Maker fee: 0.02%
• Taker fee: 0.03%
• Delivery fee: 0.015%

It’s important to understand that the total trading commission plus the delivery fee will never exceed 12.5% of the option’s price. Additionally, if the position is liquidated, an extra fee of 0.2% will be charged.

The calculation formula is as follows:

• For the buyer: Realized profit minus the premium paid minus commissions
• For the seller: Received premium minus realized loss minus commissions

This means that even if your position is theoretically profitable, commissions can significantly impact the final outcome.

Margin Requirements: Collateral for Different Positions

One of the most important aspects often overlooked by beginners is the margin requirements for different sides of the trade.

Long Option: No margin support is required. Since the buyer has already paid the full premium upfront, they do not need to hold additional reserves. They can simply hold or close the position at any time.

Short Option: Requires active margin management. When you sell an option, the broker (in this case, Bybit) sets a margin requirement, approximately 10-15% of the underlying asset’s price. This is to ensure you have sufficient funds to fulfill your obligations if the option is exercised.

Bybit also offers different margin modes—standard margin mode and portfolio margin mode—which are calculated somewhat differently, but the core principle remains: the seller must maintain reserves to cover potential losses.

This makes selling options more demanding in terms of capital management compared to buying, as you need to constantly monitor margin levels and top up your account if necessary.

Understanding these key differences is the first step toward successful options trading. Choosing between buying and selling depends on your risk tolerance, capital, and trading strategy.