On Wednesday 10 Jun 2026 a Nifty call at the 23,800 strike cost Rs 20.50 a unit. A lot is 65 units, so the buyer paid Rs 1,333 and could never lose a rupee more. The seller took in the same Rs 1,333 and had no ceiling on the loss. On Tuesday 16 Jun, Nifty closed at 23,989.15. The call was worth Rs 189.15. The seller lost 8.2 times the premium it had collected, and the buyer's Rs 1,333 became Rs 12,295. In trading group chats one sentence keeps coming back: the seller always wins. This lesson runs that sentence through the arithmetic.
3By the end you can
- Draw the payoff of a bought and a sold call and name the side that can lose more than the premium.
- Say what a buyer pays and what a seller must post, in SPAN and exposure margin.
- Explain why a high win rate can sit beside a negative expectancy, using the formula.
The idea, plainly
Think of an option as an insurance policy. The buyer pays a premium for cover. The seller is the insurer: takes the premium, promises to pay if the claim comes. Insurers win most months, because most months have no claim. Then one claim arrives and it is big. Real insurers survive because they price the risk, hold capital against it and write thousands of policies. A trader who sells one lot has one policy and a margin account.
Both sides sit in one contract, so whatever one makes the other loses. Before costs the two results add to zero. The second fact is the shape.
The buyer: pay once, lose at most that
The buyer pays the premium upfront and that is the whole bill. If the index finishes at or below the strike, the call expires worthless and the premium is gone. Above the strike plus the premium the buyer makes money, and a call has no cap on the gain. So no, a bought option cannot lose more than the premium. And yes, it can be held to expiry: Nifty options settle in cash against the index close. Module F16 covers settlement.
The buyer's loss stops at the premium and the gain has no cap
The seller: collect once, carry the tail
The seller's picture is the mirror. The most a seller of a call can make is the premium. The most the seller can lose has no limit, because the index has no ceiling. A put is different: the index cannot fall below zero, so a sold put loses at most the strike times 65, less the premium. For the 23,000 put that is about Rs 14.95 lakh per lot. A cap, on paper.
The seller's gain stops at the premium and the loss has no cap
Margin: what each side must put up
The buyer's cash goes out once: the premium, collected upfront since 1 Feb 2025. The seller receives the premium and must still post margin. Two pieces. SPAN is a portfolio model of a one day loss that should be exceeded only one day in a hundred. Exposure margin, which NSE Clearing calls extreme loss margin, is 2% of the notional value of a short index option, the index level times the units, with a further 2% on short index options on their expiry day. One lot on 10 Jun 2026 had a notional value of Rs 15.1 lakh, so the exposure piece alone came to Rs 30,179. SPAN sits on top and is recalculated through the day. When the index runs against a sold option, the requirement rises, and the seller adds money or the broker closes the position.
A buyer's cash goes out once. A seller's margin keeps moving
Futures are neither side of this bargain. Buyer and seller of a future both post margin, both are marked to market every day, and both can lose more than the margin posted. Module F07 covers futures.
Win rate is not expectancy
Win rate counts how often a trade makes money. Expectancy counts what a trade makes on average once the losses are counted too.
Expectancy =
win rate x average win
less loss rate x average loss
The seller of the 23,800 call is the clean case. Suppose its price of Rs 20.50 was fair for the risk. Then before costs neither side starts with an edge. What differs is the shape. The seller wins often and wins small. The buyer wins rarely and wins big. Same average, different win rate.
Worked example: one Nifty week, 10 to 16 Jun 2026
Take the weekly chain of 10 Jun 2026, which expired on Tuesday 16 Jun. The forward was 23,229.26. We follow one call and one put to settlement, one lot each, before any charges.
| Step | What we read | Value |
|---|---|---|
| 1 | Call, strike 23,800: premium per unit | 20.50 |
| 2 | One lot of 65 units: paid by the buyer, received by the seller | Rs 1,333 |
| 3 | Buyer's breakeven at expiry: strike plus premium | 23,820.50 |
| 4 | Nifty close on 10 Jun | 23,214.95 |
| 5 | Nifty close on 16 Jun, the settlement level | 23,989.15 |
| 6 | Call value on 16 Jun, per unit | 189.15 |
| 7 | Buyer's result per lot: (189.15 less 20.50) x 65 | Rs 10,962 |
| 8 | Seller's result per lot, the same amount reversed | −Rs 10,962 |
| 9 | Put, strike 23,000: premium per lot, kept by the seller | Rs 5,480 |
| 10 | Put value on 16 Jun, per unit | 0.00 |
Model, not market data
The seller wins often, and the few losses give back everything the wins earned
Nearly 9 in 10 individual F&O traders lost money in FY26, and almost all mainly bought options
Read 5 more paragraphs, 358 words
Nifty rose 3.3% in four sessions. The buyer of the call turned Rs 1,333 into Rs 12,295. The put ran the other way: it expired worthless, so its seller kept Rs 5,480 and its buyer lost every rupee of it. One week proves nothing, since a flat week would have flipped the call. It does show the shape: small cheques in quiet weeks, a big one in a wild week.
What do many weeks look like? I priced the same call in a plain model. Nifty at expiry follows a smooth curve whose width is the call's own implied volatility. Prices are fair and nobody has an edge. This is a model, not market data, and real indices gap more than a smooth curve allows, so real tails are heavier. Over a long run of modelled weeks the seller profits in about 91 of every hundred.
The green bar is many small wins. The red bar is exactly as long, and its parts show where it comes from: the 4 or so worst weeks in every hundred make up about 74% of the loss. A win rate of 9 in 10 and an expectancy of zero sit in the same trade. The buyer holds the mirror: about 1 week in 11 wins, and the average win is around 10 times the premium paid.
Two things bend the model. Costs come out of both sides: brokerage, exchange charges, STT of 0.15% on the premium when an option is sold, GST and slippage. Add them and both accounts sit below zero. And real options are often priced a little above the volatility that follows, which pays sellers a small premium for carrying the tail. That premium pays for the rare large loss. It is not a free gain.
Now the real world. SEBI's study of FY26 found that 87.7% of individual F&O traders ended the year with a net loss, Rs 91,685 crore in all. Options carried most of that loss, and SEBI's behaviour study found that almost all traders mainly bought options. The figures do not crown a side. They show how often the group loses, and where.
The common mistake
The belief: A strategy that wins 90 percent of the time is safe.
It is the easiest number to fake. Sell a far strike and you win often by design, because a far strike is rarely reached. The win rate hides the size of the loss in the weeks you lose. In the chart the seller wins about 9 weeks in 10, and the red bar is as long as the green one. So ask for the other half of the sentence: the average win, the average loss and the worst week. Judge a strategy by its expectancy, by the worst week it can have, and by whether the account is still open after that week.
Key takeaways
- A bought option risks the premium and no more. A sold call has no cap.
- Before costs, the buyer's result and the seller's result add to zero.
- Sellers win often in small amounts and lose rarely in large amounts.
- Win rate is how often. Expectancy is how much, on average.
- Sellers post SPAN plus exposure margin, and it moves through the day.
- In FY26, 87.7% of individual F&O traders had a net loss, says SEBI.
3 terms this section turns on
Before you trade. Derivatives trading carries a high risk of loss. SEBI's study "Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26)" (August 2026) found that 87.7% of individual traders in equity F&O made net losses in FY26, with aggregate net losses of Rs 91,685 crore. Read the SEBI study