2023-12-04 12:11:53
Buying and selling Options require two different trading strategies. Before you begin trading Options, let's compare the two.
The main differences are as follows:
Rights and obligations
Options are a form of Derivatives contract that give buyers the right to buy or sell an underlying asset at a predetermined price and date. In order to gain this right, which can be exercised in the future, to receive the benefit of the Option — the buyer pays a premium to own a Call or Put Option.
The seller of the Option is obligated to buy/sell the underlying asset from/to the buyer if the buyer decides to exercise their Option, which may result in a loss to the seller. However, the seller will receive the premium from the Option buyer.
Usually, we refer to the price of an Option as the premium — that is, the price at which the Option buyer acquires the right and the Option seller is required to perform their obligations.
Profit and Loss
Details of maximum profit and loss for Option buyers and sellers are as follows:
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From the chart above, we can see that the maximum loss for the Option buyer is the price of the premium paid, while the maximum profit for the seller is the premium paid. Thus, the trading strategy of buying Options has the advantages of limited risk and unlimited returns.
P&L Calculation
When the Option expires, the Option profit and loss recorded by the buyer and seller are as follows:
Buyer: Realized Profit − Premium
Seller: Premium − Realized Loss
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In Options trading, after deducting the trading fee and delivery fee charged by Bybit, the P&L is the actual profit and loss recorded by the buyer and seller.
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Notes:
— Trading fee and delivery fee for a single contract can never exceed 12.5% of the Option price.
— 0.2% fees will be charged for liquidations.
To learn more about how each fee is calculated, please visit here.
Maintenance Margin Occupation
Long Option: No Maintenance Margin required. The Option buyer is required to pay a premium and holds the right to exercise the Option, but not the obligation.
Short Option: Maintenance Margin required. Selling an Option requires a Maintenance Margin to ensure that the seller can meet their obligations if the Option is exercised.
Currently, the margin taken up by a short option is roughly 10% to 15% of the price of the underlying Option asset.
For more information, please refer to Margin Calculations under Regular Margin (Options).
The margin occupancy rules mentioned above are based on the Regular Margin mode, and are different in Portfolio Margin mode. For the calculation of the margin in Portfolio Margin mode, please refer here.
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