Part 2 Master Candle Stick Pattern

How Option Trading Works

Let’s take a simple example.

Suppose a stock named XYZ Ltd. is trading at ₹1000. You believe it will rise in the next month, so you buy a call option with a strike price of ₹1050, expiring in one month, and pay a premium of ₹20 per share.

If the price rises to ₹1100, your profit = (1100 - 1050 - 20) = ₹30 per share.

If the price stays below ₹1050, you lose the premium (₹20 per share).

This is the beauty of options — your loss is limited to the premium, but your potential profit is unlimited.

Similarly, if you believe the stock will fall, you can buy a put option. For example, if you buy a put option at ₹950 with a premium of ₹15:

If the stock falls to ₹900, your profit = (950 - 900 - 15) = ₹35 per share.

If the stock stays above ₹950, you lose the ₹15 premium.