Learn the stock market › Options › Lesson 8 of 9
How much can you lose on options?
The buyer: everything, but no more
A buyer knows from the start what can be lost. It is still easy to underestimate, because the whole stake can go on a fairly small move. With the stock at $100 and $5 paid for a call with a $100 strike, it is enough for the stock to stand still for you to lose 100% of what you put in.
The writer: a little in, a lot out
The example below starts with a written call where the stock has risen to $150, with round prices. Change the price at expiry and watch the line keep going down. A stock has no ceiling, so neither does the loss.
With the stock at $150 at expiry the result is −$45 per share, −$4,500 for a contract of 100 shares. Break-even is $105. The most you can lose: no limit.
The writer receives $500 for the contract. At $150 the loss is $4,500, nine times the premium.
Someone who owns the shares when writing the call has them to deliver. That is a different position with a different risk.
How large have the moves been?
Microsoft since Jan 2, 2015, the two largest moves over three months. The writer has an option 10% from the starting price, and the loss is before the premium received.
| Microsoft | The price | Writer, one contract |
|---|---|---|
| Largest rise: a call struck 10% above Mar 23, 2020 – Jun 22, 2020 | $135.97 → $200.54 | −$5,098 |
| Largest fall: a put struck 10% below Dec 24, 2025 – Mar 27, 2026 | $488.01 → $356.76 | −$8,245 |
The rise of +47% ran from Mar 23, 2020 to Jun 22, 2020. A move like that would have cost the writer of a call $5,098 per contract. The fall of −27% would have cost the writer of a put $8,245. More large falls are in the study of market crashes.
Test yourself
Who can lose the most on a call if the stock rises a lot and the writer does not own the stock?
How the stock has moved: Why did Microsoft move?
Sources
- US Securities and Exchange Commission, An Introduction to Options, updated July 16, 2026: holders risk the entire premium, and writers can face unlimited potential losses.