Why is it cheaper to buy a call put in the stock market while selling a call put is expensive?

 Friend,

To understand this you will have to understand the theoretical concept of profit loss.

Let us not stress our mind too much. I will explain it in the simplest terms. For a while, remove call or put from your mind. Just keep in mind buying and selling.

Now let us take the example further.

Suppose the price of a stock is Rs. 10.

Case 1: Now if you buy it, what will be your maximum risk?

Even if the stock falls a lot, it will not go below zero. That is, in the condition of buying, the risk is fixed.

On the other hand,

Case 2: If we sell this stock, then in such a case, the lower it goes, the more we make a profit and the higher it goes, the more we lose.

Is it right?

Now if we see in such a case, the maximum profit of the seller in this stock is fixed at Rs. 10. Because the stock will not fall below this. But if we talk about risk, then the stock can rise above 10 unlimitedly. That is, the risk of a seller is not limited.

Keeping this in mind, the broker asks for more margin from the seller. So that it can be compensated in the condition of unlimited loss.

Hope you have understood in simple words why the seller has to spend more money.

Hope the post will be useful for you.

Thank you