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Part 9 Trading Master ClassOption Expiry and Settlement Every option contract has a fixed expiry date, after which it becomes invalid. In India, for example, index options like NIFTY and BANKNIFTY expire weekly or monthly, while stock options usually have monthly expiries. There are two types of settlements: Cash Settlement: The difference between the strike and market price is credited or debited in cash (used in index options). Physical Settlement: The actual delivery of stocks occurs (used in stock options in India). Understanding expiry cycles is crucial, as price movements near expiry can become highly volatile due to time decay and traders closing positions.
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Part 7 Trading Master Class Understanding Option Premium and Its Factors The option premium is the price a trader pays to buy an option. It consists of two parts — intrinsic value and time value. Intrinsic Value is the difference between the current price of the underlying asset and the strike price. For example, if a stock trades at ₹110 and the call strike is ₹100, the intrinsic value is ₹10. Time Value reflects the potential for the option to gain more value before expiry. The longer the time to expiry and the higher the volatility, the greater the time value. As expiry nears, time value decreases — a phenomenon known as time decay (theta). Understanding how premium behaves helps traders make better entry and exit decisions.
BSE:SENSEXEducation
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Part 8 Trading Master ClassOption Greeks – The Key Metrics Option pricing is influenced by several mathematical variables known as Option Greeks: Delta: Measures how much the option price moves for every ₹1 change in the underlying asset. Theta: Measures time decay — how much the option loses value daily as expiry nears. Vega: Measures sensitivity to volatility; higher volatility increases premium. Gamma: Tracks how much delta changes when the underlying price moves. Rho: Measures sensitivity to interest rate changes. Professional traders rely on these Greeks to manage risk and adjust positions according to market conditions.
NSE:TATAMOTORSEducation
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Part 3 Institutional Trading How Option Trading Works Option trading involves two participants — the buyer and the seller (writer). A buyer pays a premium to gain the right to trade. A seller receives the premium but must fulfill the obligation if the buyer exercises the option. For example, if you buy a Call Option for a stock at ₹100 with a premium of ₹5, and the stock rises to ₹120, you can buy it at ₹100 and make a profit (₹15 net after premium). If the stock stays below ₹100, you simply let the option expire, losing only the ₹5 premium.
NSE:TCSEducation
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Part 1 Ride The Big Moves What is Option Trading? Option trading is a type of derivatives trading where the value of the contract is based on an underlying asset, such as a stock, index, or commodity. An option gives the trader the right, but not the obligation, to buy or sell the underlying asset at a fixed price (called the strike price) before or on a specific date (called the expiry date). There are two main types of options — Call Options and Put Options. A Call Option gives the right to buy the asset. A Put Option gives the right to sell the asset. Traders use options for hedging risks, speculating on price movements, or earning income through premiums.
BITSTAMP:BTCUSDEducation
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Part 12 Trading Master Class With Experts Common Option Trading Strategies Options can be combined in different ways to create strategies with defined risk and reward profiles. Some popular strategies include: Covered Call – Holding a stock and selling a call option on it (income strategy). Protective Put – Holding a stock and buying a put to protect downside risk. Straddle – Buying both call and put at the same strike to profit from big moves. Strangle – Similar to a straddle, but strikes are different. Iron Condor – Selling both a call and a put spread to profit from a sideways market.
NASDAQ:TSLAEducation
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Part 2 Ride The Big Moves Key Components of Option Contracts Every option has specific terms that determine its value and use: Underlying Asset: The stock, index, or commodity the option is based on. Strike Price: The pre-decided price at which the buyer can buy or sell the asset. Premium: The price paid to purchase the option. Expiry Date: The date when the option contract ends. Lot Size: The number of shares per contract (e.g., 50 shares for NIFTY options). The value of an option depends on factors such as the market price of the asset, time left to expiry, and volatility. These factors influence whether the option is in-the-money (ITM), at-the-money (ATM), or out-of-the-money (OTM).
NSE:AXISBANKEducation
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Part 11 Trading Master Class With Experts Option Greeks Option prices are influenced by several factors, measured through the Greeks: Delta: Measures how much the option price changes with a ₹1 move in the underlying. Gamma: Measures how Delta changes as the underlying price changes. Theta: Measures time decay (how the option loses value daily). Vega: Measures sensitivity to volatility changes. Rho: Measures sensitivity to interest rate changes. Traders use these Greeks to manage risk and plan strategies.
NSE:BAJFINANCEEducation
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Part 2 Support and Resistance Why Traders Use Options Options are versatile instruments. Traders use them for: Speculation – Betting on price movement to earn profits. Hedging – Protecting existing investments from adverse price moves. Income Generation – Selling options (writing) to earn the premium. For example: A trader may buy a call option expecting prices to rise. A portfolio manager may buy put options to protect their stocks from falling prices. An experienced investor may sell covered calls to earn regular income.
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Part 1 Support and Resistance How Option Trading Works Let’s take a simple example: You buy a Call Option for Reliance Industries with a strike price of ₹2,400, expiring in one month. The premium is ₹50 per share, and the lot size is 250 shares. So, your cost = ₹50 × 250 = ₹12,500. If the stock price rises to ₹2,500 before expiry, your option becomes profitable. You can either exercise your right to buy at ₹2,400 (and immediately sell at ₹2,500), or you can sell the option itself in the market for a profit. If the stock stays below ₹2,400, your option will expire worthless, and your loss will be limited to the premium paid (₹12,500).
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Option Trading What Is an Option? An option is a contract between two parties: the buyer and the seller (writer). It gives the buyer the right—but not the obligation—to buy or sell an underlying asset at a predetermined price (called the strike price) before or on a specific date (called the expiry date). There are two main types of options: Call Option – gives the buyer the right to buy the asset. Put Option – gives the buyer the right to sell the asset.
NSE:BANKNIFTYEducation
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Part 2 Candle Stick PatternUnderstanding Call and Put Options There are two basic types of options: Call Options and Put Options. Call Option: A call option gives the holder the right, but not the obligation, to buy an underlying asset at a specific price (called the strike price) before a specific date (called the expiry date). Put Option: A put option gives the holder the right, but not the obligation, to sell an underlying asset at a specific strike price before expiry.
MCX:GOLD1!Education
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Part 1 Candle Stick PatternRisks and Rewards in Option Trading Option trading offers tremendous potential—but it comes with unique risks. Understanding these is essential: Limited Time: Options lose value as expiry nears due to time decay (Theta). Volatility Risk: Sudden drops in volatility can reduce option prices unexpectedly. Liquidity Risk: Some options have low trading volume, making it difficult to enter or exit positions. Leverage Effect: Options amplify both gains and losses. Margin Requirements (for Sellers): Option writers must maintain sufficient margin, as potential losses can be large.
FXOPEN:XAUUSDEducation
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PCR Trading Strategies Introduction to Option Trading Option trading is a segment of the financial market where traders buy and sell contracts that give them the right—but not the obligation—to buy or sell an asset at a predetermined price within a specific time period. These contracts are known as options. Unlike stocks or commodities, where traders own the underlying asset directly, options allow traders to speculate on price movements, hedge risks, or leverage their investments.
BINANCE:BTCUSDEducation
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Part 9 Trading Master Class With Experts Option Chain and Market Data Traders analyze the option chain—a table showing available strikes, premiums, and open interest. Key Insights from Option Chain: Open Interest (OI): High OI at a strike → strong support or resistance zone. Change in OI: Helps identify where traders are building positions. Put-Call Ratio (PCR): Indicator of market sentiment. PCR > 1 → bullish sentiment; PCR < 1 → bearish. Option chain analysis helps identify market bias, expected ranges, and potential breakout zones.
BITSTAMP:ETHUSDEducation
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