Most traders purchase Call and Put options. When they anticipate the market will rise, they buy Call options and then buy Put options when the market falls. There is a riskier trade that is only a few traders make. This is called Shorting, Writing or Selling Options.
In Options trading selling \ writing or selling means , you sell a Call or Put option hoping that its price will go down and be resulting in profits for you. The likelihood of losing or making less money is higher for Options traders who buy options. If a majority loses, then who is winning? The traders on the other side, i.e. Sellers
Time value works for sellers, but it doesn't work against buyers. If the market does not move or fall, the seller is increasing. As we all know, premium = intrinsic value + time value. If the intrinsic value is static, then the seller has an advantage since the premium price drops with each passing day.
Option buyers have a limited loss and unlimited risk potential, while sellers can make a greater profit or lose less. For an example -
Nifty 50 Spot price
Nifty 50 Short-Term Call Strike Price
Dividends eligible for premium
Break Even Point (Strike price + Premium)
Rs. 154 X 75 = Rs 11.550
Let's now see how payoffs change depending on the expiration date and closing price for the Nifty 50.
NIFTY 50 Closing price (CP)
Net Payoff (BEP CP)*75. Max Profit = 4500
The table above shows that you can make a greater profit by selling Options, but there are also higher risks if the market moves against you.
Option shorting has significantly higher margins than buying Option. The margins are marked to market, which means that you must maintain margin based on your loss each day.