What Is the Option Buyer’s Maximum Loss?
The option buyer's maximum loss is limited to the premium paid for the option contract. Since the buyer has the right, but not the obligation, to exercise, they can simply let the option expire worthless if it is OTM, losing only the initial cost.
Glossar
Limited Risk in Options
Exposure ⎊ Limited risk in options, within the context of cryptocurrency derivatives, fundamentally concerns strategies designed to constrain potential losses while retaining the opportunity for profit.
Buyer
Position ⎊ A buyer, within cryptocurrency, options, and derivatives markets, occupies the initiating role in acquiring an asset or contract, establishing a long exposure predicated on anticipated price appreciation or a hedging requirement.
Option Buyer's Maximum Loss
Exposure ⎊ The Option Buyer's Maximum Loss, fundamentally, represents the total capital at risk when purchasing an options contract.