> Are you saying that risk management is (mostly) buying suitable options to balance your trade ?

Kind of. Fundamentally risk management comes down to bankroll management. And one workable general approach is the Kelly criterion[1] or something like it. However, unlike casino games, with options we don't know the true odds and have to estimate them in most cases. And there are other risks like theta, which is how all else being equal an option loses premium value as expiration approaches. Therefore we can't just use Kelly directly. A trivially simple strategy that is suboptimal, but is good enough for learning is to never risk more than 1% of your trading bankroll[2]. The end result is that as you make winning bets your bet size increases and as you make losing bets your bet size decreases. Remember your goal at this level of knowledge is hands on learning with some skin in the game to sharpen your attention.

In the prior paragraph the trivial basic risk management strategy is "never risk" more than 1%. The reason I say never risk rather than never bet is because when trading options you can lose more than you bet! In fact you can potentially go to zero. A simple example is selling an uncovered call, that is to say selling someone the right to buy some multiple of 100 shares of a stock at a fixed price while not actually owning the stock to sell to them if they exercise the contract. Therefore, if the contract is exercised you have to go and buy however many shares are needed to cover the call. Since there is no limit to how much higher the market price can be than the call's strike price, you can lose an unbounded amount of money from a bet that actually increased your cash on hand when you entered it. Most (all?) trading platforms have some notion of options levels. I highly advise not requesting the level that lets you make such bets. I personally don't see any good point to them[3] and for a slightly increase in premium you can make very similar bets without the unlimited downside by using spreads.

If you are unspeakably unfortunate or otherwise consistently make losing bets, then even solid risk management can result in your ruin. However, it will be a slow process and hopefully somewhere before disaster you will conclude that trading derivatives isn't where your gifts lie and preserve what remains of your capital.

> I have often wondered why the price of the option does not naturally find a level that exactly cancels out the trade?

Options markets aren't perfectly efficient. Furthermore, the typical leverage is 100:1, which magnifies even small pricing inefficiencies. In fact, there isn't even agreement on how to price options at all. The Black-Scholes model[4] is just one popular model and many traders think it has problems.

> My instinct is at some point there is always a losing side. Why enter?

Yes, derivatives trading isn't investment, and there is always (usually?) a winner and a loser for every trade. However, there are market participants that make trades that set out to make a loss. For example, A trader may need to execute a hedging strategy and one leg of it will lose money if his primary trade goes as he hopes. Nevertheless, the opportunity remains to potentially be the counterparty on hedging leg. This is a pretty complicated area and I don't pretend to have a deep understanding of it, but if you dig in you'll find plenty of discussion.

There are also market participants who are just making bad trades. When you start you'll probably be one of them, which is why I emphasize risk management. Their counterparties also have a good opportunity to profit.

[1] https://en.wikipedia.org/wiki/Kelly_criterion

[2] And that bankroll itself should be less than your total financial net worth (IE paper assets like cash and stocks and so on, not real estate). Don't bet your emergency fund and so on. How much less depend on your own circumstances and is more a general matter of savings allocation than anything derivatives trading specific.

[3] But as I said I'm not an expert, just a dabbler who did OK. Perhaps some sufficiently advanced trader can come up with a good reason to make such a bet that isn't just based on hubris and wishful thinking.

[4] https://www.investopedia.com/terms/b/blackscholes.asp