Why Do Traders Often Sell OTM Options Instead of Buying Them?
Traders often sell OTM options to collect the premium, which is composed entirely of time value. This strategy profits from the decay of time value (Theta) and the high probability that the option will expire worthless.
Selling OTM options is a high-probability, low-return strategy, contrasting with buying OTM options, which is a low-probability, high-return strategy.
Glossar
Buying
Execution ⎊ Buying within cryptocurrency, options, and derivatives contexts signifies the confirmed instantiation of an order to acquire an asset or contract at a prevailing or specified price, representing a commitment of capital and a shift in portfolio composition.
Probability of Profit
Strategy Metric ⎊ Probability of Profit is a forward-looking metric calculated for an options position, representing the statistical likelihood that the trade will expire with a net positive financial outcome, contingent upon the underlying asset price remaining within profitable bounds.