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Part 1 Trading Master Class With ExpertsBasic Terminology in Option Trading Before diving deep, let’s get familiar with key terms used in options: Call Option – Gives the buyer the right (not obligation) to buy the underlying asset at a certain price before expiry. Put Option – Gives the buyer the right (not obligation) to sell the underlying asset at a certain price before expiry. Strike Price – The fixed price at which the option holder can buy (for calls) or sell (for puts) the underlying asset. Premium – The price paid to buy the option contract. This is the cost of obtaining the right. Expiry Date – The date when the option contract expires. After this, the contract becomes invalid.
TVC:GOLDEducation
by SkyTradingZone
Part 1 Intraday Master ClassIntroduction to Option Trading Option trading is one of the most fascinating and flexible areas in the financial markets. Unlike traditional stock trading — where you buy or sell shares directly — options give you the right but not the obligation to buy or sell an underlying asset (like a stock, index, or commodity) at a fixed price within a specified time. Think of options as financial contracts that allow traders and investors to speculate on price movements, hedge existing positions, or earn income — all without actually owning the underlying asset. For example, if you believe Reliance Industries’ stock will go up, instead of buying the shares directly, you can buy a call option — a cheaper contract that benefits if the stock price rises. Conversely, if you expect a fall, you can buy a put option. The main advantage? Leverage. You control a large position with a relatively small investment. But this also means risk — because options lose value as time passes or if prices move against your expectation.
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Part 2 Intraday Master ClassTraders use options for three main purposes: Hedging: Investors use options to protect their portfolios from adverse price movements. For example, owning a put option can protect a stock investor from a market downturn. Speculation: Traders buy or sell options to profit from expected movements in asset prices. Since options require a smaller initial investment compared to buying stocks directly, they offer higher potential returns—but also higher risk. Income Generation: Many investors sell (write) options to earn premiums regularly. For example, covered call writing is a popular income strategy where investors sell call options on stocks they already own. While options offer leverage and flexibility, they also carry risks—especially for sellers. The maximum loss for an option buyer is limited to the premium paid, but an option seller’s potential loss can be unlimited if the market moves sharply against them.
NSE:ICICIBANKEducation
by SkyTradingZone
2
Part 12 Trading Master Class Profit and Loss Buyer’s profit can be unlimited (especially for call options) but the loss is limited to the premium paid. Seller’s profit is limited to the premium received but losses can be unlimited. Option Strategies Traders combine calls and puts to form strategies like covered calls, straddles, strangles, spreads, etc., depending on whether they expect the market to rise, fall, or remain stable. Uses of Options Options are used for: Hedging (reducing risk on existing positions) Speculation (betting on price movements) Income generation (through option writing)
NSE:SBINEducation
by SkyTradingZone
Part 11 Trading Master Class Strike Price The strike price is the pre-decided price at which the option buyer can buy (call) or sell (put) the underlying asset. Expiry Date Options have a limited life. The expiry date is the last day the option can be exercised—after this, it becomes worthless. Premium The premium is the cost paid by the buyer to purchase the option. It’s determined by factors like time left to expiry, volatility, and distance from the strike price. Leverage Options provide high leverage—you can control large positions with a small amount of money. However, this also increases potential risk.
BSE:SENSEXEducation
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Part 4 Learn Institutional Trading Option trading is a type of derivative trading where traders buy or sell the right (but not the obligation) to buy or sell an underlying asset—like stocks, indices, or commodities—at a specific price before a certain date. Two Main Types of Options Call Option: Gives the holder the right to buy the asset. Put Option: Gives the holder the right to sell the asset. Key Participants There are two sides in an options trade: Buyer (Holder): Pays a premium for the right to trade. Seller (Writer): Receives the premium and has an obligation to fulfill the contract if exercised.
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Part 3 Learn Institutional TradingKey Terminologies in Option Trading Before diving deeper, let’s understand a few critical terms: Strike Price: The predetermined price at which the option can be exercised. Premium: The price you pay to buy the option contract. Expiry Date: The date on which the option contract ends. In-the-Money (ITM): When exercising the option is profitable. For Calls: When market price > strike price. For Puts: When market price < strike price. Out-of-the-Money (OTM): When exercising the option is not profitable. At-the-Money (ATM): When the market price equals the strike price. Lot Size: Options are traded in predefined quantities called lots. Underlying Asset: The stock, index, or commodity on which the option is based. These basics are the building blocks for understanding how profits and losses are calculated.
NSE:RELIANCEEducation
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Part 2 Ride The Big Moves Understanding Call and Put Options There are two main types of options: Call Options and Put Options. Call Option: A call option gives the holder the right to buy the underlying asset at a fixed strike price within a specified time. Example: If you buy a call option on Reliance at ₹2,500 strike price and the price rises to ₹2,700, you can exercise your right to buy at ₹2,500 and profit from the difference. Put Option: A put option gives the holder the right to sell the underlying asset at a fixed strike price within a specified time. Example: If you buy a put option on Infosys at ₹1,500 strike price and the stock falls to ₹1,300, you can sell at ₹1,500 and gain the difference. Think of a Call Option as being bullish (expecting price rise) and a Put Option as being bearish (expecting price fall).
Education
by SkyTradingZone
Part 1 Ride The Big Moves Introduction to Options Trading Options trading is one of the most fascinating and flexible instruments in the financial market. It allows traders and investors to speculate, hedge, and generate income — all from the same market tool. An option is a financial derivative — meaning its value is derived from an underlying asset, such as stocks, indices, commodities, or currencies. Options are contracts that give the buyer the right, but not the obligation, to buy or sell an asset at a specific price (called the strike price) before or on a particular date (called the expiry date). In essence, options trading helps investors control large positions with relatively smaller amounts of capital while limiting risk when used correctly.
NSE:NIFTYEducation
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Part 4 Institutional TradingThe Structure of an Option Contract Every option contract has certain key components: Underlying asset – The stock, index, or commodity the option is based on. Strike price – The agreed-upon price at which the asset can be bought or sold. Expiration date – The last date when the option can be exercised. Premium – The cost paid by the buyer to the seller. Lot size – The standardized quantity of the underlying represented by one option contract. Example: If you buy a Nifty 20,000 Call Option at ₹200 premium, one lot size is 50. Total cost = ₹200 × 50 = ₹10,000. You gain if Nifty moves above 20,200 (strike + premium).
NSE:TATASTEELEducation
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5
Part 2 Ride The Big MovesIntroduction Financial markets have evolved significantly over the last century, offering a wide variety of instruments to investors and traders. One such instrument is options, which provide flexibility, leverage, and hedging opportunities. Unlike straightforward investments such as stocks or bonds, option trading involves contracts that derive their value from an underlying asset—making them part of the broader derivatives market. For professional traders, options are indispensable for hedging risk, generating income, and leveraging market moves. For retail participants, they represent both a fascinating opportunity and a high-risk tool that requires discipline and knowledge. This guide explains option trading in detail, starting from the basics and moving into advanced strategies, risks, and practical applications.
CRYPTO:BTCUSDEducation
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Part 1 Ride The Big Moves1. Introduction to Options An option is a financial contract that 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 specified expiration date. Unlike stocks, options do not represent ownership in a company; instead, they are derivatives whose value is derived from the underlying asset (stocks, indices, commodities, or currencies). There are two primary types of options: Call Option: Grants the holder the right to buy the underlying asset at the strike price. Put Option: Grants the holder the right to sell the underlying asset at the strike price. Options can be American style (exercisable any time before expiration) or European style (exercisable only on the expiration date). 2. Key Terminology in Options Trading To trade options effectively, you must understand the key terms: Strike Price (Exercise Price): The price at which the underlying asset can be bought (call) or sold (put). Premium: The cost of buying an option. Determined by factors like intrinsic value, time to expiration, volatility, and interest rates. Expiration Date: The date on which the option contract becomes invalid. In-the-Money (ITM): A call option is ITM if the stock price > strike price; a put is ITM if stock price < strike price. Out-of-the-Money (OTM): A call option is OTM if the stock price < strike price; a put is OTM if stock price > strike price. At-the-Money (ATM): The stock price is approximately equal to the strike price. 3. How Options Work Options allow investors to control a larger number of shares with relatively small capital. Let’s look at an example: Example: Stock price of XYZ Ltd.: ₹1,000 Call option strike price: ₹1,050 Premium: ₹50 Expiration: 1 month If the stock rises to ₹1,200, the call option holder can exercise the option, buy at ₹1,050, and sell at ₹1,200, making a profit of ₹150 per share (minus the premium of ₹50, net profit = ₹100). If the stock stays below ₹1,050, the option expires worthless, and the loss is limited to the premium paid. This limited-loss feature makes options attractive for hedging. 4. Participants in Options Market Options trading involves different market participants with varying objectives: Hedgers: Use options to protect their existing investments from adverse price movements. For example, a stock investor buys a put option to safeguard against a potential fall in stock price. Speculators: Seek profit from price movements without owning the underlying asset. They take higher risk for potentially higher rewards. Arbitrageurs: Exploit price discrepancies between options and the underlying assets to earn risk-free profits. 5. Option Pricing Models Option pricing is critical for traders. The two most commonly used models are: Black-Scholes Model (for European options): It calculates the theoretical value of options using factors such as stock price, strike price, time to expiration, volatility, and risk-free interest rate. Binomial Model: Uses a step-by-step approach to evaluate options, useful for American options due to their early-exercise feature. Factors Affecting Option Premiums: Intrinsic Value: Difference between the underlying price and strike price. Time Value: Additional value due to remaining time until expiration. Volatility: Higher volatility increases premiums. Interest Rates and Dividends: Can influence option pricing.
MCX:GOLD1!Education
by SkyTradingZone
5
Part 12 Trading Master Class With ExpertsI. Introduction to Options What is an Option? An option is a financial derivative contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a predetermined price (strike price) within a specified time period. Options derive their value from the underlying asset, which can be stocks, indices, commodities, currencies, or ETFs. Types of Options There are two primary types: Call Option: Gives the holder the right to buy the underlying asset at a strike price before expiration. Put Option: Gives the holder the right to sell the underlying asset at a strike price before expiration. Buyers vs. Sellers Option Buyer (Holder): Pays a premium for the right to exercise the option. Limited risk (premium paid), unlimited or capped potential reward depending on call or put. Option Seller (Writer): Receives the premium. Obligated to fulfill the contract if exercised. Higher risk, especially in uncovered options. Option Premium Explained The premium is the price paid for the option. It comprises two components: Intrinsic Value: The real, immediate profit if exercised now (for in-the-money options). Time Value: Additional value based on time left until expiration and market volatility. Option Expiration and Exercise Options have a fixed expiration date. Exercise can happen in two ways: American Style: Can be exercised any time before expiration. European Style: Can only be exercised at expiration. II. Understanding Option Pricing Factors Affecting Option Pricing The price of an option (premium) is influenced by: Underlying asset price Strike price Time to expiration Volatility Interest rates Dividends Intrinsic vs. Extrinsic Value Intrinsic Value: Difference between underlying asset price and strike price (only if in-the-money). Extrinsic Value: Time value and volatility premium. Represents potential for future gains. Moneyness of Options Options are classified based on their intrinsic value: In-the-Money (ITM): Profitable if exercised now. At-the-Money (ATM): Strike price equals the underlying asset price. Out-of-the-Money (OTM): Not profitable if exercised now. The Greeks – Risk and Sensitivity Measures Options are influenced by “Greeks” which measure sensitivity to different factors: Delta: Sensitivity of option price to underlying asset price change. Gamma: Rate of change of delta. Theta: Time decay of option value. Vega: Sensitivity to volatility. Rho: Sensitivity to interest rates. Black-Scholes & Binomial Models Option pricing models estimate theoretical values: Black-Scholes Model: For European options; factors in price, strike, volatility, time, and risk-free rate. Binomial Model: Uses a stepwise approach; suitable for American options.
NSE:RELIANCEEducation
by SkyTradingZone
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