Why Is the Loss Limited to the Premium for the Option Buyer? ⎊ Path

Why Is the Loss Limited to the Premium for the Option Buyer?

The option buyer's loss is limited to the premium because they have the right, but not the obligation, to exercise. If the market moves unfavorably, they can choose to let the option expire worthless, having only lost the initial cost (the premium).

How Do Options Differ from Futures in Terms of Obligation?

Why Is the Maximum Loss for a Long Call Option Limited to the Premium Paid?

What Is the Difference between a “Call Option” and a “Put Option”?

Why Is the Maximum Loss on a Long Option Position Limited to the Premium?

What Is the Maximum Loss a Buyer of a Put Option Can Incur?

What Is the Maximum Loss for the Buyer of an ITM Call Option?

What Is a “Rug Pull” in the Context of ICOs?

How Does a Futures Contract Differ from an Options Contract?

Glossar

Limited Loss

Risk ⎊ Limited loss refers to a characteristic of certain financial instruments and trading strategies where the maximum potential loss for the investor is predetermined and capped.

Option Buyer's Loss

Exposure ⎊ Option buyer’s loss in cryptocurrency derivatives arises when the underlying asset price movement diverges unfavorably from the buyer’s expectation at expiration, resulting in the option expiring worthless.