An option is a financial contract that gives the buyer the right to buy or sell an asset at a specific price before a certain date.
The two main types are Call options (right to buy) and Put options (right to sell).
A call option gives the buyer the right to buy the underlying asset at a fixed price before expiry.
A put option gives the buyer the right to sell the underlying asset at a fixed price before expiry.
It is the price at which the buyer can buy (call) or sell (put) the underlying asset.
The expiry date is the last day on which the option can be exercised.
It is the price paid by the buyer to the seller to purchase the option contract.
The option buyer pays the premium and has the right to exercise the contract.
The seller receives the premium and has the obligation to fulfill the contract if exercised.
It means the option has intrinsic value and would result in profit if exercised immediately.
An option is at the money when the strike price = current price of the underlying asset.
It means the option has no intrinsic value and wouldn’t be profitable if exercised now.
If you are a buyer, your maximum loss is limited to the premium. If you are a seller, your losses can be unlimited.
Yes, options are available on individual stocks and indices like Nifty and Bank Nifty.
It is the fixed number of units of the underlying asset per contract (e.g., 50 shares for Nifty options).
No, Only in-the-money options are usually exercised. Others expire worthless
If the option is profitable, it will be settled. If not, it will expire worthless.
Yes, you can square off your position anytime before expiry if there is enough liquidity in the market.
If an option expires worthless, the buyer loses the premium paid, and the seller keeps it as profit.
Open interest is the total number of outstanding option contracts that are yet to be closed or settled.
Implied volatility shows how much the market expects the price of the asset to move in the future. Higher volatility usually means higher premiums.
Yes, you can buy and sell options within the same trading day, just like intraday trading in stocks.
The exchange (like NSE) facilitates trading, maintains contract standards, and ensures settlement and transparency.