Option Buyer
The holder who pays a premium for the right to exercise — loss capped at the premium, upside open.
Definition
An option buyer (or holder) is the party that pays the premium to acquire an option. In return they get the right, but not the obligation, to exercise — to buy the underlying with a call or sell it with a put at the strike before expiry. The counterparty is the option writer.
Why it matters
Buying gives defined risk and leverage: the most a buyer can lose is the premium, while gains can be many times that on a strong move. The catch is that buyers fight time decay — theta erodes premium every day — so the underlying must move enough, and soon enough, to beat the cost. No margin is required beyond the premium.
Example
You buy a 22,600 NIFTY call for a premium of 120. If NIFTY rises to 22,900 by expiry, the call is worth 300 — a profit of 180 per unit. If NIFTY stays at or below 22,600, the call expires worthless and your loss is limited to the 120 premium.
Price a buy live
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