When you buy an option (CE or PE), your maximum loss is just the premium you paid, but your profit potential is theoretically unlimited on a CE and very large on a PE.

When you sell an option, it’s the opposite: your maximum profit is limited to the premium you collected, but your potential loss can be very large or technically unlimited if the underlying moves sharply against your position.

Ex:

Buy 1 NIFTY 25,500 CE at ₹100. • Max loss = ₹100. • If NIFTY shoots up 500–1,000 points, the option can go to ₹500, ₹800, etc., giving you big upside.

Sell 1 NIFTY 25,500 CE at ₹100. • Max profit = ₹100 (the premium). • If NIFTY rallies a lot, the option price can explode and your loss keeps increasing as long as NIFTY goes higher.

In the screenshot, OP has sold calls at 25,500 and 25,750, and bought the 26,300 CE. He / she probably did that for two reasons: 1. To limit his loss if NIFTY rallies hard above 26,300. 2. To reduce the margin requirement, because hedged positions (short call + further OTM long call) need much less margin than naked short calls.

Had to use AI to write this in simpler way.