Why look at notional contract value when buying options?

Yes, when you buy options the max you can lose is the premium you have paid. But to get a sense of risk and how fast or easily you can lose, you should look at the exposure or contract value, not the premium.

For eg, you have Rs 1L & you use it to buy 20 lots of Nifty calls = Rs 1.6 Crore contract value. While the idea might be to exit fast with profits, a Rs 1.6Cr risk can cause losses to the Rs 1L much faster. A tiny <1% change in contract value is enough to wipe out Rs 1L.

Btw the reason why most end of the day buy option positions are in losses is because they are mostly entered as intraday trade. Exit with small profits but held overnight when in losses( also triggered from fear due to high exposure). This is a sure-shot way to lose money.

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