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Part 1 Intraday TradingKey Terms in Option Trading To understand option trading well, you must know these important terms: Strike Price: The fixed price at which the underlying asset can be bought or sold. Premium: The price paid to purchase an option. Expiry Date: The date when the option contract ends. In the Money (ITM): When exercising the option is profitable. Out of the Money (OTM): When exercising the option is not profitable. At the Money (ATM): When the asset’s price is equal to the strike price.
BSE:SENSEXEducation
by SkyTradingZone
Part 9 Trading Master ClassHow Option Trading Works Let’s take an example: You buy a call option for a stock at a strike price of ₹100 for a premium of ₹5. If the stock price rises to ₹120 before expiry, you can exercise your right to buy at ₹100 and sell at ₹120, earning ₹20 profit per share (minus ₹5 premium = ₹15 net profit). If the price remains below ₹100, you simply let the option expire and lose only the premium paid (₹5). This flexibility — limited loss and unlimited profit potential for buyers — is what makes option trading so attractive.
Education
by SkyTradingZone
Part 8 Trading Master ClassKey Terms in Option Trading To understand option trading well, you must know these important terms: Strike Price: The fixed price at which the underlying asset can be bought or sold. Premium: The price paid to purchase an option. Expiry Date: The date when the option contract ends. In the Money (ITM): When exercising the option is profitable. Out of the Money (OTM): When exercising the option is not profitable. At the Money (ATM): When the asset’s price is equal to the strike price.
NSE:NIFTYEducation
by SkyTradingZone
Part 9 Trading Master ClassThe Role of Time Decay (Theta) One of the most crucial aspects of options is time decay, or Theta. Every day that passes reduces the time left for an option to become profitable. This means option buyers are fighting against time, while sellers benefit from it. For example, an option worth ₹10 today may be worth only ₹5 a week later — even if the stock price hasn’t changed — because its time value has decayed. This is why experienced traders say, “Options are wasting assets.” Option sellers often use this decay to their advantage, designing trades that profit as time passes, provided the market doesn’t move too sharply.
Education
by SkyTradingZone
Part 7 Trading Master Class Option Premium: What Determines the Price The premium is what you pay (or receive) to enter an option contract. It is determined by several factors: Intrinsic Value: The difference between the stock price and strike price, if favorable to the holder. Time Value: The longer the time until expiration, the higher the premium — because there’s more opportunity for the stock to move. Volatility: When a stock is more volatile, its options become costlier due to the higher probability of large price movements. Interest Rates and Dividends: These also slightly affect option prices. An option pricing model like Black-Scholes or Binomial helps estimate the fair premium based on these factors.
NSE:AXISBANKEducation
by SkyTradingZone
4
Part 6 Learn Institutional Trading Put Options Explained A put option gives the buyer the right to sell the underlying asset at the strike price. Buyers of puts are bearish, expecting the price to fall. Sellers of puts are bullish or neutral, expecting the price to stay above the strike. Example: You buy an Infosys put option with a strike price of ₹1,600 for ₹40. If Infosys drops to ₹1,500, your option is worth ₹100 (₹1,600 - ₹1,500). Profit = ₹100 - ₹40 = ₹60 per share. If Infosys remains above ₹1,600, your option expires worthless and you lose ₹40. Put options are also used for hedging — protecting a stock portfolio from potential declines.
BSE:SENSEXEducation
by SkyTradingZone
2
Part 4 Learn Institutional Trading Call Options Explained A call option gives the buyer the right to purchase the underlying asset at the strike price. Buyers of calls are bullish, expecting the price to rise. Sellers (writers) of calls are bearish or neutral, expecting the price to stay below the strike. Example: You buy a Reliance Industries call option with a strike price of ₹2,400, paying a premium of ₹50. If Reliance rises to ₹2,500, your option is worth ₹100 (₹2,500 - ₹2,400). Your profit = ₹100 - ₹50 = ₹50 per share. If the stock remains below ₹2,400, you lose the ₹50 premium. Call options are often used to participate in upward moves without committing large amounts of capital.
SP:SPXEducation
by SkyTradingZone
2
Part 3 Learn Institutional TradingHow Option Trading Works Let’s say you believe that the stock of XYZ Ltd., currently trading at ₹100, will rise in the next month. Instead of buying 100 shares (which would cost ₹10,000), you could buy one call option that gives you the right to buy 100 shares at ₹100 (the strike price) within a month. If this option costs ₹5 per share, your total cost is only ₹500 (₹5 × 100). If the stock price rises to ₹120, you can exercise your call and buy the shares at ₹100, making a profit of ₹20 per share minus the ₹5 premium = ₹15 per share. If the stock stays below ₹100, you simply let the option expire worthless, losing only your ₹500 premium. This leverage — the ability to control ₹10,000 worth of stock with just ₹500 — is what makes options powerful but also risky.
CRYPTO:BTCUSDEducation
by SkyTradingZone
4
Part 2 Ride The Big MovesWhat Are Options? The Basics Options are derivative instruments, meaning their price depends on something else — the underlying asset. Each option contract has four key components: Underlying Asset: The stock or index the option is based on. Strike Price: The agreed-upon price at which the asset can be bought or sold. Expiration Date: The date when the option contract ends. Premium: The price paid to buy the option contract. There are two main types of options: Call Option: Gives the holder the right to buy the underlying asset at the strike price before or at expiration. Put Option: Gives the holder the right to sell the underlying asset at the strike price before or at expiration. If you buy a call, you expect the price of the underlying asset to go up. If you buy a put, you expect it to go down.
NSEIX:NIFTY1!Education
by SkyTradingZone
2
Part 1 Ride The big Moves Introduction: The Power of Choice in the Market Option trading is one of the most fascinating and flexible segments of the financial market. Unlike buying or selling shares directly, options give traders choices — the right, but not the obligation, to buy or sell an underlying asset at a specific price within a given time. This ability to control large positions with relatively small capital and manage risk precisely makes options attractive to both professional and retail traders. An option is essentially a contract between two parties — a buyer and a seller — that derives its value from an underlying asset like a stock, index, commodity, or currency. Understanding how these contracts work and the logic behind their pricing helps investors make informed trading decisions.
NSE:ICICIBANKEducation
by SkyTradingZone
Part 3 Learn Institutional Trading What is Option Trading? Option trading is a type of financial trading where you buy and sell options contracts instead of directly trading stocks or assets. An option gives you the right, but not the obligation, to buy or sell an underlying asset (like a stock, index, or commodity) at a specific price before a certain date. Think of it as booking a deal for the future—you pay a small price now to lock in a potential opportunity. Traders use options for speculation (to make profits from price movements) or hedging (to protect against losses).
FOREXCOM:XAUUSDEducation
by SkyTradingZone
Part 2 Ride The Big Moves American vs. European Options Options can be American-style or European-style. American options can be exercised any time before expiry, while European options can be exercised only on the expiry date. In India, stock options are American, while index options are European. In-the-Money, At-the-Money, and Out-of-the-Money These terms describe an option’s relationship to the current market price: In-the-Money (ITM): Option has intrinsic value. At-the-Money (ATM): Strike price equals the current price. Out-of-the-Money (OTM): Option has no intrinsic value yet.
BITSTAMP:BTCUSDEducation
by SkyTradingZone
4
Part 1 Ride The Big Moves American vs. European Options Options can be American-style or European-style. American options can be exercised any time before expiry, while European options can be exercised only on the expiry date. In India, stock options are American, while index options are European. In-the-Money, At-the-Money, and Out-of-the-Money These terms describe an option’s relationship to the current market price: In-the-Money (ITM): Option has intrinsic value. At-the-Money (ATM): Strike price equals the current price. Out-of-the-Money (OTM): Option has no intrinsic value yet.
NASDAQ:TSLAEducation
by SkyTradingZone
PCR Trading Strategies Option Greeks – Risk Indicators “Greeks” like Delta, Gamma, Theta, Vega, and Rho measure how sensitive an option’s price is to factors such as the underlying asset’s price, volatility, time decay, and interest rates. They help traders assess risk precisely. Strategies and Combinations Traders combine calls and puts to create option strategies such as straddles, strangles, spreads, and iron condors. These allow profit from different market conditions—rising, falling, or even sideways trends.
BINANCE:BTCUSDEducation
by SkyTradingZone
Part 1 Support and Resistance Option Buyers vs. Sellers Buyers have limited risk (only the premium paid) but unlimited profit potential. Sellers (writers) have limited profit (the premium received) but potentially unlimited loss, especially in uncovered positions. Leverage and Capital Efficiency Options allow traders to control large positions with a small investment. This leverage magnifies both profits and losses, making options powerful but risky tools for speculation or hedging.
NSE:ICICIBANKEducation
by SkyTradingZone
Part 2 Candle Stick PatternStrike Price and Expiry Date Every option has a strike price (the agreed-upon price for buying/selling) and an expiry date (the last date the option can be exercised). These two factors determine an option’s time value and overall profitability. Premium – The Cost of the Option The premium is the price paid by the buyer to the seller (writer) of the option. It represents the maximum loss for the buyer and potential profit for the seller if the option expires worthless.
NSE:AXISBANKEducation
by SkyTradingZone
2
Part 1 Candle Stick PatternDefinition of Options Options are financial contracts that give traders the right, but not the obligation, to buy or sell an underlying asset (like stocks, indices, or commodities) at a predetermined price within a specific time frame. They are a type of derivative since their value depends on the price of another asset. Types of Options – Call and Put There are two main types: Call Option: Gives the right to buy the asset at a fixed price. Put Option: Gives the right to sell the asset at a fixed price. Traders use calls when expecting prices to rise and puts when expecting prices to fall.
CRYPTO:BTCUSDEducation
by SkyTradingZone
2