Option trading carries significant risk due to the inherent leverage involved. Buyers can lose the entire premium paid for the option if it expires worthless, while sellers may face unlimited losses, especially when writing uncovered options. Market volatility, unpredictable price movements, and time decay can erode the value of options quickly. Additionally, options have expiration dates, adding a time constraint to their value. Traders must carefully assess their risk tolerance, implement strategies like stop-loss orders, and ensure they understand the mechanics of options before engaging in trading to mitigate potential losses effectively. Risk management is crucial in options trading.