Part 3 Institutional Trading

Types of Option Traders

There are mainly four types of participants:

Option Buyers (Long Call / Long Put)

Pay premium.

Limited loss (premium), unlimited profit.

Usually retail traders.

Option Sellers (Short Call / Short Put)

Receive premium.

Limited profit (premium), unlimited loss.

Usually big institutions (because margin required is high).

This is why buyers dream, sellers earn is often said in option markets.

Why Trade Options?

Options are powerful because they allow:

Leverage → Small premium controls large value.

Hedging → Protect portfolio from crashes (insurance).

Speculation → Bet on direction, volatility, or time decay.

Income → Selling options to earn steady premium (if managed wisely).