Option Selling

Option selling, or writing, involves creating and selling options contracts to other market participants. By doing so, the seller collects the premium immediately, which serves as their profit if the option expires worthless or is bought back at a lower price.

However, this strategy carries significant risk, as the seller is obligated to fulfill the contract if the buyer chooses to exercise it. Successful option sellers often use mathematical models to manage risk and probability.

This approach is favored by income-focused traders who want to capitalize on time decay and volatility premiums in the market.