Option Seller is always winner for many reason and rarely they faces losses.
- Patience: Option Seller is the game of Patience and only those could become option seller who is having patience for 30 days.
- Time Decay: Patience is Needed to eat time decay. One day i.e. last day will come when the time value will become zero and all the time value of money will be eaten by the seller.
- Cushion of Premium: This is the most important reason to understand the cushion of Premium which we could understand by taking an example.
Example: Let us say if we sell Nifty Put Option of 22000 which means seller is saying Nifty will expire above Nifty 22000 and then Seller will get full Premium at the time of expiry if Nifty expired above 22000. Suppose Seller get the premium of Rs 200. So, basically Seller is having No Loss till 21800 even though Nifty has fallen to 200 points. This is the cushion.
4. Power of Adjustment: Not only this Option Seller could do the adjustment also
All these are the reasons behind making Always Option Seller as a Winner.