What are the risks of option buyers?
1, the value is zero risk.
That is the risk of losing all royalties. Although this is the biggest loss for the buyer, it can be avoided by taking measures.
For example, set a stop loss position, and when it reaches the stop loss position, stop loss in time. For example, 500 yuan bought an option, and when the option price dropped to 400, he stopped and closed his position. At this time, the loss is 100, not all 500 royalties.
2. Liquidity risk.
If the option contract you buy is not active enough, there is a risk that you want to close your position without a counterparty. Therefore, when choosing options, you must choose a contract with good liquidity.
3. Exercise risk.
There are two points here: first, forget to exercise, that is to say, the option you bought has exercise income, but you forget to exercise before it expires.
Although the exchange will automatically exercise this option, the premise is that the account funds should be sufficient. Because it will become future positions after exercise, it needs to occupy funds according to the margin of futures. If there is not enough funds in the account, even if there is income from the exercise, the exchange can't give you the automatic exercise.
Second, after the exercise on the same day, you can't get the future positions until the next trading day. If you encounter extreme changes in the market, it is still good for you to exercise. But on the next trading day, after you get future positions, the market runs counter to your position. At this point, future positions may lose money. In other words, because of the time difference, it may cause risks.
What are the risks of option buyers? Is it correct to say that the buyer's loss may be infinite? Incorrect, it should be that the loss of the option seller may be infinite. The option buyer pays a premium when opening the position, and can choose to exercise or not. If the market is unfavorable, he will not exercise his rights. The biggest loss of non-exercise is the premium paid when opening the position, so the loss of the option buyer is limited. If it is an option seller, no matter how unfavorable the market is, it needs to fulfill its obligations to the buyer, so the possibility of the seller's loss is infinite.