Institutional Master class
Option Trading Explained
Options are financial derivatives that provide the right, but not the obligation, to buy or sell an underlying asset at a predetermined price within a specific period.
Types of Options:
Call Option: Right to buy the underlying asset.
Put Option: Right to sell the underlying asset.
Components of an Option Contract:
Strike Price: The agreed price to buy/sell.
Premium: Price paid to acquire the option.
Expiration Date: Date when the option contract ends.
Option Trading Strategies:
Buying Calls/Puts: Simple directional bets.
Covered Call: Holding stock while selling a call option to generate income.
Protective Put: Buying a put option to hedge a long stock position.
Spreads: Combining options to limit risk and cost.
