Part 12 Trading Master Class With Experts

Risks in Option Trading

While options can enhance profits, they also carry risks:

Time Decay (Theta Risk) – Options lose value as they near expiration.

Volatility Risk – Sudden drops in volatility can erode option premiums.

Liquidity Risk – Illiquid options may have wide bid-ask spreads, leading to slippage.

Unlimited Loss Potential for Sellers – Writing naked options can result in huge losses.

Complexity – Understanding the interplay of Greeks and pricing models requires skill and experience.