Why Sell Options ?

Why Sell Option Premium ?

When you buy an option, the probabilities are against you if you are wrong. Not only do you have to be right on direction but also you have to be correct on time too.
Options have both intrinsic and extrinsic money value. The extrinsic value of an option is what makes buying options a loser’s game. An options contract loses value every day that it gets closer to its expiration date. If the underlying asset of an option doesn’t move by expiration then you lose all the premium you buy.

On the opposite hand, as an options seller you would like the underlying to stay in the range. Every day that passes as an seller you get to gather the daily time decay of an option’s extrinsic value (also referred to as theta). You’re basically acting like an insurance firm collecting premium.

For example, once you buy an ATM at-the-money call , you have < 50/50 chance to earn a profit. As a buyer, Its a bullish bet and since you paid a premium for the bet the stock has to move up past the premium to make profit. As a Seller now if you sell an ATM call during a stock you really have a far better than 50/50 chance of making money because you get to keep the credit premium. The stock can go down or up less (<) than  the premium you collected to make profit.

Summary
The only way to make a consistently profitable income in the market is to stick to the probabilities. Let the math do all the heavy lifting. Buying options doesn’t make sense, nor does the math to make consistent profit.