These contracts give you the right, but not the obligation, to buy or sell an underlying asset (like a stock or index) at a specified price before a certain date.
Basic Concepts:
1. Types of Options
Call Option: Gives the buyer the right to buy the underlying asset.
Put Option: Gives the buyer the right to sell the underlying asset.
Basic Option Terms
Term
Simple Meaning
Option
A contract that gives you the right (not obligation) to buy or sell something at a fixed price.
Call Option
Buy this when you think the price will go up. Gives right to buy.
Put Option
Buy this when you think the price will go down. Gives right to sell.
Strike Price
The price at which you can buy or sell using the option.
Premium
The cost to buy the option contract.
Expiry
The last date the option is valid (usually Thursday of the week/month).
Lot Size
The number of shares in one option contract (e.g., Nifty = 75).
Underlying
The asset the option is based on (like Nifty, Bank Nifty, a stock).
Trading Option
Term
Meaning
Long
Buying an option.
Short
Selling (writing) an option.
Exercise
Using the option to buy/sell at the strike price.
Square Off
Closing your position before expiry.
Settlement
Final profit/loss calculation on expiry.
Important Terms
If you’re trading Nifty or Bank Nifty options, always check:
OI buildup at different strikes
Support/Resistance levels
India VIX (volatility index)
These will help you judge market mood and direction
