As shown above, a long options trade has unlimited profit potential, and limited risk, but a short options trade has limited profit potential and unlimited risk. However, this is not a complete risk analysis, and in reality, short options trades have no more risk than individual stock trades (and actually have less risk than buy and hold stock trades).
Similarly, if you believe the company’s share price is going to dip to $80, you’d buy a put option (giving you the right to sell shares) with a strike price above $80 (ideally a strike price no lower than $80 plus the cost of the option, so that the option remains profitable at $80). If the stock drops below the strike price, your option is in the money.
Call writers and put writers (sellers), however, are obligated to buy or sell if the option expires in-the-money (more on that below). This means that a seller may be required to make good on a promise to buy or sell. It also implies that option sellers have exposure to more, and in some cases, unlimited, risks. This means writers can lose much more than the price of the options premium.
With straddles (long in this example), you as a trader are expecting the asset (like a stock) to be highly volatile, but don't know the direction in which it will go (up or down). When using a straddle strategy, you as the trader are buying a call and put option at the same strike price, underlying price and expiry date. This strategy is often used when a trader is expecting the stock of a particular company to plummet or skyrocket, usually following an event like an earnings report. For example, when a company like Apple  (AAPL) is getting ready to release their third quarter earnings on July 31st, an options trader could use a straddle strategy to buy a call option to expire on that date at the current Apple stock price, and also buy a put option to expire on the same day for the same price.
The price at which you agree to buy the underlying security via the option is called the "strike price," and the fee you pay for buying that option contract is called the "premium." When determining the strike price, you are betting that the asset (typically a stock) will go up or down in price. The price you are paying for that bet is the premium, which is a percentage of the value of that asset. 
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