an option is a financial contract between a buyer and a seller that gives the buyer the right, but not the obligation, to buy or sell an underlying asset, such as a stock, at a predetermined price within a specified time period. The buyer of the option pays a premium to the seller for this right.
CALL Options for Long View and PUT Options for Sell View
One of the most significant factors that can lead to losses for option buyers is time decay. Options have an expiration date, and as that date approaches, the option loses value.
Another factor that can cause losses for option buyers is market movement. The value of an option is affected by the underlying asset's price movement.
Options can also be affected by changes in the implied volatility of the underlying asset. Implied volatility is a measure of the expected volatility of the underlying asset over a specific period.
Options have a strike price, which is the price at which the option can be exercised. If the option's strike price is not reached, the option may expire worthless, causing the buyer to lose their entire investment.
Finally, option buyers must pay a premium to purchase the option. The premium is the price paid for the option and is determined by various factors, including the underlying asset's price, implied volatility, time to expiration, and strike price.