pfd
Published
2026-08-03
Section
Regular Issues
License
Copyright (c) 2026 Artha: Journal of Business and Finance
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
How to Cite
Why do option-buyers lose money?
Rajarshi Som
Keywords: option-buyers, volatility risk
Abstract
Option-buyers lose money on average, and most of the losses are borne by retail investors who do not understand why option-buyers are supposed to lose money. Options transfer risk from the buyer to the seller, and the buyer pays the seller a compensation commonly called the volatility risk premium. This premium can be further decomposed into premia for volatility risk and for jump risk, and includes premia for higher-order risks like volatility-of- volatility risk and jump-of-volatility risk.
Author Biography
Rajarshi Som, Indian School of Business
Rajarshi Som, Indian School of BusinessRajarshi Som is a doctoral candidate in Financial Economics at the Indian School of Business. His research focuses on options and asset pricing through trading strategies and has received the 2025 BlackRock Applied Research Award and Best PhD Paper at the 2026 Global Banking and Finance Conference. He holds an MBA from IIM Calcutta, a BTech from NIT Durgapur, and has completed CFA Level III and FRM Part II. His professional experience spans strategy, trading, and operations roles at Tracxn, Edelweiss Financial Services, Altisource, and Siemens.
