Options

Options are financial derivatives that allow the holder to buy or sell an asset at a specified price within a certain period. In the Indian stock market, there are call options and put options. Call options give the buyer the right to buy the asset, while put options give the buyer the right to sell the asset. The price paid for these options is called the premium. Options have expiration dates and are typically traded in lots. Options are financial derivatives that give the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price, strike price, within a specified period, until expiration. In the context of the Indian stock market, options trading involves contracts based on individual stocks or market indices. There are two main types of options, call options and put options. Call Options Buyer's perspective, a call option gives the buyer the right, but not the obligation, to purchase the underlying asset at the specified strike price before or at the expiration date. Seller's perspective, the seller, writer, of the call option has the obligation to sell the underlying asset if the buyer decides to exercise the option. Example, if an investor buys a call option on a stock with a strike price of 1,500 rupees, they have the right to buy the stock for 1,500 rupees per share before or at the expiration date. Put Options Buyer's perspective, a put option gives the buyer the right, but not the obligation, to sell the underlying asset at the specified strike price before or at the expiration date. Seller's perspective, the seller, writer, of the put option has the obligation to buy the underlying asset if the buyer decides to exercise the option. Example, if an investor buys a put option on a stock with a strike price of 1,200 rupees, they have the right to sell the stock for 1,200 rupees per share before or at the expiration date. Key Concepts Related to Options Trading in the Indian Stock Market Option Premium, the price paid by the buyer to the seller for the rights conveyed by the option contract. It represents the cost of obtaining the option. Expiration Date, the date when the option contract expires. After this date, the option is no longer valid. Strike Price, the predetermined price at which the underlying asset can be bought, for call options, or sold, for put options, if the option is exercised. Lot Size, options in the Indian stock market are typically traded in lots. == Notes