Part 6 Learn Institutional TradingOptions in Indian Markets
In India, options are traded on NSE and BSE, primarily on:
Index Options: Nifty, Bank Nifty (most liquid).
Stock Options: Reliance, TCS, Infosys, etc.
Weekly Expiry: Every Thursday (Nifty/Bank Nifty).
Lot Sizes: Fixed by exchanges (e.g., Nifty = 50 units).
Practical Example – Nifty Options Trade
Scenario:
Nifty at 20,000.
You expect big movement after RBI policy.
Strategy: Buy straddle (20,000 call + 20,000 put).
Cost = ₹200 (call) + ₹180 (put) = ₹380 × 50 = ₹19,000.
If Nifty moves to 20,800 → Call worth ₹800, Put worthless. Profit = ₹21,000.
If Nifty stays at 20,000 → Both expire worthless. Loss = ₹19,000.
Option Trading Psychology
Patience: Many options expire worthless, don’t chase every trade.
Discipline: Stick to stop-loss and position sizing.
Avoid Greed: Sellers earn small consistent income but risk blow-up if careless.
Stay Informed: News, earnings, and events impact volatility.
Harmonic Patterns
Part 1 Ride The Big Moves Call and Put Options in Action
Call Option Example
Reliance is trading at ₹2500.
You buy a 1-month call option with strike price ₹2550, premium ₹50, lot size 505.
If Reliance rises to ₹2700 → Profit = (2700 - 2550 - 50) × 505 = ₹50,500.
If Reliance falls below 2550 → You lose only the premium (₹25,250).
Put Option Example
Nifty is at 20,000.
You buy a 1-month put option, strike 19,800, premium 100, lot size 50.
If Nifty falls to 19,200 → Profit = (19,800 - 19,200 - 100) × 50 = ₹25,000.
If Nifty rises above 19,800 → You lose premium (₹5,000).
Participants in Options Trading
Option Buyer – Pays premium, has limited risk and unlimited profit potential.
Option Seller (Writer) – Receives premium, has limited profit and potentially unlimited risk.
Example:
Buyer of call: Unlimited upside, limited loss (premium).
Seller of call: Limited profit (premium), unlimited loss if stock rises.
Part 2 Master Candlestick PatternKey Terms in Options Trading
Before diving into strategies, let’s master some core concepts:
Underlying Asset: The stock/index/commodity on which the option is based.
Strike Price: The price at which the option can be exercised.
Expiration Date: The date on which the option contract ends.
Premium: The price paid by the option buyer to the seller (writer) for the contract.
In-the-Money (ITM): Option has intrinsic value (profitable if exercised).
At-the-Money (ATM): Underlying price = Strike price.
Out-of-the-Money (OTM): Option has no intrinsic value yet (not profitable to exercise).
Lot Size: Options are traded in lots (e.g., Nifty option has a fixed lot of 50 units).
Leverage: Options allow control of large positions with smaller capital.
How Options Work
Options are like insurance. Imagine you own a house worth ₹50 lakh and buy insurance. You pay a small premium so that if the house burns down, you can recover your value. Similarly:
A call option is like paying for the right to buy a stock cheaper later.
A put option is like insurance against stock prices falling.
Part 1 Master Candlestick PatternIntroduction to Options Trading
Options trading is one of the most powerful tools in the financial markets. Unlike traditional stock trading, where you buy or sell shares directly, options allow you to control an asset without owning it outright. This gives traders flexibility, leverage, and a wide range of strategies for both profits and risk management.
At its core, an option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price (called the strike price) on or before a certain date (the expiration date).
The beauty of options lies in choice: you can profit whether markets are rising, falling, or even staying flat—if you know how to use them.
What is an Option?
An option is a derivative instrument, meaning its value is derived from the price of another asset (the “underlying”), such as:
Stocks (e.g., Reliance, Apple)
Indexes (e.g., Nifty, S&P 500)
Commodities (e.g., Gold, Oil)
Currencies
Two Main Types of Options:
Call Option – Gives the right to buy the underlying asset.
Put Option – Gives the right to sell the underlying asset.
Example:
A call option on Reliance with a strike price of ₹2500 expiring in one month gives you the right (not the obligation) to buy Reliance shares at ₹2500, regardless of the market price.
A put option with a strike of ₹2500 gives you the right to sell at ₹2500.
Part3 Trading MasterclassOption Trading vs Stock Trading
Stocks = Ownership, long-term growth, dividends.
Options = Contracts, leverage, flexible strategies.
Stocks = Simpler, but capital-intensive.
Options = Complex, but require less capital and offer hedging.
For example:
Buying 100 shares of Reliance at ₹2500 = ₹2,50,000.
Buying 1 call option of Reliance at ₹100 premium with lot size 250 = only ₹25,000.
This leverage makes options attractive—but also riskier.
Real-Life Examples & Case Studies
Case 1: Bull Market
A trader buys Nifty 20000 Call at ₹200 premium. Nifty rallies to 20500. Profit = ₹300 (500 – 200). Huge return on a small premium.
Case 2: Bear Market
Investor holds TCS shares but fears a fall. Buys a protective put. When stock drops, put increases in value, reducing losses.
Case 3: Neutral Market
Trader sells an Iron Condor on Bank Nifty, betting price will stay range-bound. Premium collected = profit if market stays sideways.
Part 1 Trading MasterclassRisks & Rewards in Option Trading
Option trading can be thrilling, but it’s not without risks.
For Buyers:
Maximum loss = premium paid.
Maximum profit = potentially unlimited (for calls) or huge (for puts).
For Sellers:
Maximum gain = premium received.
Maximum loss = unlimited (for calls) or very large (for puts).
Risks also come from:
Time decay (options lose value daily).
Volatility crush (sudden drop in implied volatility can reduce premiums).
Liquidity issues (wide bid-ask spreads can hurt execution).
That’s why risk management (stop-losses, proper sizing, hedging) is crucial.
Option Trading vs Stock Trading
Stocks = Ownership, long-term growth, dividends.
Options = Contracts, leverage, flexible strategies.
Stocks = Simpler, but capital-intensive.
Options = Complex, but require less capital and offer hedging.
For example:
Buying 100 shares of Reliance at ₹2500 = ₹2,50,000.
Buying 1 call option of Reliance at ₹100 premium with lot size 250 = only ₹25,000.
This leverage makes options attractive—but also riskier.
Divergence SecretsRisks & Rewards in Option Trading
Option trading can be thrilling, but it’s not without risks.
For Buyers:
Maximum loss = premium paid.
Maximum profit = potentially unlimited (for calls) or huge (for puts).
For Sellers:
Maximum gain = premium received.
Maximum loss = unlimited (for calls) or very large (for puts).
Risks also come from:
Time decay (options lose value daily).
Volatility crush (sudden drop in implied volatility can reduce premiums).
Liquidity issues (wide bid-ask spreads can hurt execution).
That’s why risk management (stop-losses, proper sizing, hedging) is crucial.
Option Trading vs Stock Trading
Stocks = Ownership, long-term growth, dividends.
Options = Contracts, leverage, flexible strategies.
Stocks = Simpler, but capital-intensive.
Options = Complex, but require less capital and offer hedging.
For example:
Buying 100 shares of Reliance at ₹2500 = ₹2,50,000.
Buying 1 call option of Reliance at ₹100 premium with lot size 250 = only ₹25,000.
This leverage makes options attractive—but also riskier.
Option Trading Option Pricing & The Greeks
Options are not priced randomly. Their value comes from several factors:
Intrinsic Value: The real, tangible value (difference between stock price and strike).
Time Value: Extra premium paid for the possibility of future movement.
Volatility: The higher the uncertainty, the higher the option premium.
Option Greeks – the essential toolkit:
Delta – Measures how much an option’s price changes with a change in stock price. (Think: sensitivity to price).
Gamma – Measures how much Delta itself changes.
Theta – Time decay. Shows how much an option loses value each day as expiration approaches.
Vega – Sensitivity to volatility. Higher volatility = higher option price.
Rho – Sensitivity to interest rates (less relevant for short-term traders).
Understanding Greeks is like knowing the gears of a car—they help control risk.
Option Trading Strategies
Here’s where things get exciting. Options are like Lego blocks—you can combine them in different ways to create powerful strategies.
A. Basic Strategies
Buying Calls – Bullish bet.
Buying Puts – Bearish bet.
Covered Call – Holding a stock and selling calls to earn income.
Protective Put – Owning stock and buying puts to insure against loss.
B. Intermediate Strategies
Straddle – Buy a call + put at same strike, betting on big movement (either direction).
Strangle – Similar to straddle but different strikes, cheaper.
Bull Call Spread – Buy one call, sell a higher strike call. Profits capped but cheaper.
Bear Put Spread – Buy a put, sell lower strike put.
C. Advanced Strategies
Iron Condor – Selling an OTM call spread + OTM put spread, betting on low volatility.
Butterfly Spread – Combining multiple options to profit if stock stays near a target price.
Calendar Spread – Exploiting time decay by selling short-term and buying long-term options.
Each strategy has a risk-reward profile and works best in specific market conditions.
Part 2 Support and ResistanceHow Options Work
Let’s break it down simply:
If you buy a call, you are betting that the price of the stock will go up.
If you buy a put, you are betting that the price of the stock will go down.
If you sell (write) a call, you are taking the opposite bet—that the stock won’t rise much.
If you sell (write) a put, you are betting that the stock won’t fall much.
Here’s a quick example:
Stock XYZ trades at ₹100.
You buy a 1-month call option with a strike price of ₹105 by paying a ₹5 premium.
If the stock rises to ₹120, your option is worth ₹15 (120 – 105). Since you paid ₹5, your profit = ₹10.
If the stock stays below ₹105, the option expires worthless, and you lose your premium of ₹5.
This example shows that options can magnify profits if you’re right, but they can also cause losses (limited to the premium paid for buyers, unlimited for sellers).
Types of Options
A. Call Options
Right to buy.
Used when you expect prices to rise.
Buyers have limited risk (premium) but unlimited upside.
Sellers (writers) have limited gain (premium received) but unlimited risk.
B. Put Options
Right to sell.
Used when you expect prices to fall.
Buyers have limited risk but big upside if stock falls sharply.
Sellers have limited gain (premium) but large risk if stock collapses.
Part 1 Support and Resistance1. Introduction to Options
In the world of financial markets, traders and investors use various tools to manage risk, speculate on price movements, or generate additional income. One of the most powerful and flexible tools is options trading.
An option is a financial derivative, which means its value is derived from another underlying asset. This underlying asset could be a stock, an index, a commodity, or even a currency. Unlike stocks, where you own a piece of the company, an option is a contract that gives you certain rights related to buying or selling the underlying asset at a specific price and within a specified time.
Options are incredibly versatile. Traders use them for hedging (protection against loss), speculation (betting on future price moves), or income generation (selling options for premiums). But with great flexibility comes complexity, and that’s why understanding option trading deeply is essential before jumping in.
2. Basic Terminology in Option Trading
Before diving deep, let’s clear some essential terms:
Call Option: A contract giving the right (not obligation) to buy an asset at a predetermined price (strike price) before expiration.
Put Option: A contract giving the right (not obligation) to sell an asset at a predetermined price before expiration.
Strike Price: The fixed price at which the option holder can buy (for calls) or sell (for puts) the underlying.
Premium: The cost of purchasing an option contract. This is the price paid upfront by the buyer to the seller (writer).
Expiration Date: The date when the option contract expires. After this, the option becomes worthless if not exercised.
In the Money (ITM): An option that has intrinsic value. For calls, when the stock price > strike price. For puts, when stock price < strike price.
Out of the Money (OTM): An option with no intrinsic value (only time value). For calls, stock price < strike price. For puts, stock price > strike price.
At the Money (ATM): When the stock price and strike price are roughly equal.
Option Writer: The seller of the option contract. They receive the premium but take on obligation.
Lot Size: Options are traded in fixed quantities called lots (e.g., 50 or 100 shares per contract depending on the market).
Understanding these terms is like learning the alphabet before writing sentences—you need them to progress.
Part 4 Institutional Trading Types of Option Strategies
Here’s the heart of the discussion: strategies.
Single-Leg Strategies (Simple & Beginner-Friendly)
a) Long Call (Buying a Call)
View: Bullish
Risk: Limited to premium paid
Reward: Unlimited (theoretically)
Example: Buy Reliance 2800 CE @ ₹50 → If Reliance goes to 2900, profit = ₹50.
b) Long Put (Buying a Put)
View: Bearish
Risk: Limited to premium paid
Reward: Large downside profit potential
Example: Buy Nifty 22,000 PE → If Nifty falls, profit rises.
c) Covered Call
View: Neutral to mildly bullish
How it works: Hold stock + Sell a Call option
Goal: Earn income from option premium
Risk: Stock falls significantly.
d) Cash-Secured Put
View: Neutral to bullish
How it works: Sell a Put with enough cash to buy stock if assigned.
Goal: Collect premium or buy stock cheaper.
Part 2 Ride The Big MovesBasics of Options
Before jumping into strategies, let’s revisit some fundamentals:
Call Option: Gives the buyer the right to buy the asset at a specific strike price.
Put Option: Gives the buyer the right to sell the asset at a specific strike price.
Option Premium: The price paid to buy an option.
Strike Price: The price at which the underlying can be bought/sold.
Expiry Date: The last date the option can be exercised.
ITM (In-the-Money): Option has intrinsic value (profitable if exercised).
OTM (Out-of-the-Money): Option has no intrinsic value (not profitable if exercised).
ATM (At-the-Money): Strike price is very close to current market price.
💡 Quick Example:
Nifty is at 22,000. You buy a 22,000 Call Option for ₹200 premium. If Nifty rises to 22,500, your option has value (ITM). If Nifty stays flat or goes down, you may lose the premium.
Now, depending on whether you buy or sell Calls/Puts, you can build hundreds of strategies.
Why Traders Use Options
Options are powerful because they can serve three main purposes:
Hedging – Protecting an existing portfolio from adverse price moves.
Example: A long-term investor holding Infosys shares may buy a Put option to protect against a fall.
Speculation – Betting on market direction with limited capital.
Example: Buying a Call if you expect bullish momentum.
Income Generation – Selling options to collect premium regularly.
Example: Writing Covered Calls on stocks you own.
The same instrument (options) can be used very differently by traders with different goals. That’s why strategies matter.
Part 2 Candle Stick Pattern Introduction to Options Trading
In the world of financial markets, traders are always looking for ways to manage risk, generate income, or profit from price movements. Stocks, bonds, and futures are common instruments, but options trading adds a completely new layer of flexibility.
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 specific price (called the strike price) on or before a certain date (called the expiry date).
Unlike stocks, which represent ownership in a company, options are derivative contracts—their value is derived from the movement of an underlying asset such as Nifty, Bank Nifty, Reliance Industries, Tesla, Gold, Crude Oil, etc.
The beauty of options is that they allow traders to benefit in bullish, bearish, or even sideways markets, depending on the strategy used. That’s why understanding option trading strategies is like learning the different moves in a chess game—you pick the right one for the right situation.
Basics of Options
Before jumping into strategies, let’s revisit some fundamentals:
Call Option: Gives the buyer the right to buy the asset at a specific strike price.
Put Option: Gives the buyer the right to sell the asset at a specific strike price.
Option Premium: The price paid to buy an option.
Strike Price: The price at which the underlying can be bought/sold.
Expiry Date: The last date the option can be exercised.
ITM (In-the-Money): Option has intrinsic value (profitable if exercised).
OTM (Out-of-the-Money): Option has no intrinsic value (not profitable if exercised).
ATM (At-the-Money): Strike price is very close to current market price.
💡 Quick Example:
Nifty is at 22,000. You buy a 22,000 Call Option for ₹200 premium. If Nifty rises to 22,500, your option has value (ITM). If Nifty stays flat or goes down, you may lose the premium.
Now, depending on whether you buy or sell Calls/Puts, you can build hundreds of strategies.
Option Trading Option Greeks – The Core of Option Pricing
Options are complex instruments whose prices change with many factors. To understand price behavior, traders rely on Option Greeks.
Delta (Δ)
Measures sensitivity of option price to underlying asset movement.
Call delta ranges 0 to +1; Put delta ranges 0 to -1.
Example: If Delta = 0.5, a ₹10 stock move increases option price by ₹5.
Theta (Θ)
Time decay. Options lose value as expiry approaches.
Bad for buyers, good for sellers.
Vega (ν)
Sensitivity to volatility. Higher volatility increases option premium.
Gamma (Γ)
Measures change in Delta when the stock price moves.
Rho (ρ)
Sensitivity to interest rate changes (less relevant in short-term trading).
👉 Mastering Greeks is key for professional option traders because they help predict how option premiums will behave under changing conditions.
PCR Trading How Option Trading Works
Let’s simplify with an example:
Stock Price: ₹1000
Call Option Strike: ₹1050
Premium: ₹20
Lot Size: 100 shares
If you buy the call option:
Break-even = Strike Price + Premium = ₹1070
If stock goes to ₹1100 → Profit = (1100-1050-20) × 100 = ₹3000
If stock stays below ₹1050 → You lose only the premium = ₹2000
If you sell (write) the call option:
You collect ₹2000 premium upfront.
If stock stays below 1050, you keep the entire premium as profit.
But if stock goes to ₹1100, you face unlimited loss: (1100-1050-20) × 100 = -₹3000.
👉 This shows: Option buyers have limited risk but unlimited profit potential, while sellers have limited profit but unlimited risk.
Part 1 Support And ResistanceIntroduction to Option Trading
The stock market offers multiple instruments to trade and invest—stocks, futures, commodities, currencies, and derivatives. Among these, Options have gained tremendous popularity worldwide because they give traders flexibility, leverage, and strategies to profit in all types of market conditions—bullish, bearish, or even sideways.
At its core, an Option is a contract that gives a buyer the right but not the obligation to buy or sell an asset at a predetermined price (called the strike price) before or on a specific date (called the expiry date).
This right comes at a cost, known as the premium, which is paid by the option buyer to the option seller (also called the writer).
Options are widely traded on stocks, indices, commodities, and currencies. In India, for example, options on Nifty 50, Bank Nifty, Sensex, and individual stocks are among the most liquid contracts.
Why Options Exist?
Options exist to manage risk and to create trading opportunities. Think of them as financial insurance. Just like you pay a premium for car insurance to protect against damage, in options trading, investors pay a premium to protect themselves against adverse price moves.
For Hedgers: Options act as insurance. A stock investor can buy a put option to protect his portfolio if the market falls.
For Speculators: Options provide leverage. With small capital, traders can take large directional bets.
For Arbitrageurs: Options open opportunities to exploit price inefficiencies between the spot, futures, and options markets.
Part 1 Master Candle Sticks PatternRisk Management in Options
Position Sizing: Don’t risk more than 1–2% of capital in one trade.
Stop Loss: Exit before premium erodes completely.
Avoid Over-leverage: Options look cheap but risk is real.
Hedge Positions: Combine with futures or other options.
Psychology of Option Traders
Greed: Chasing high-return trades without risk control.
Fear of Missing Out (FOMO): Jumping in near expiry due to excitement.
Patience: Waiting for correct setup is key.
Discipline: Stick to rules, avoid revenge trading.
Modern Trends in Option Trading
Weekly Expiry Craze: Thursday = biggest trading day.
0DTE (Zero Day to Expiry) Options: Popular for scalping.
Algo & AI Trading: Automated strategies now dominate.
Retail Participation Explosion: India has seen retail option traders grow 5x in 3 years.
Part 3 Learn Institutional TradingCall Options & Put Options Explained
Options are of two types:
🔹 Call Option
Gives the right to buy an asset at a fixed price.
Buyers of call options are bullish (expect prices to rise).
👉 Example:
If Nifty is at 22,000 and you buy a 22,100 Call Option for ₹100 premium, you pay ₹100 × lot size (say 50) = ₹5,000.
If Nifty rises to 22,400, the 22,100 call is worth 300 points. Profit = (300 - 100) × 50 = ₹10,000.
If Nifty stays below 22,100, you lose only the premium ₹5,000.
🔹 Put Option
Gives the right to sell an asset at a fixed price.
Buyers of put options are bearish (expect prices to fall).
👉 Example:
If Bank Nifty is at 48,000 and you buy a 47,800 Put for ₹200 premium, lot size = 15.
If Bank Nifty falls to 47,000, option value = 800 points. Profit = (800 - 200) × 15 = ₹9,000.
If Bank Nifty stays above 47,800, you lose only premium = ₹3,000.
So:
Call = Bullish bet.
Put = Bearish bet.
Part 1 Ride The Big MovesIntroduction to Options Trading
In the world of financial markets, options trading is considered one of the most powerful and flexible forms of trading. Unlike simple stock buying and selling, options allow traders to control larger positions with less capital, hedge their risks, and design strategies that fit different market conditions — bullish, bearish, or even sideways.
An option is essentially a contract that gives the buyer the right, but not the obligation, to buy or sell an asset at a specific price (called the strike price) within a given period of time.
If you buy an option, you are purchasing a right.
If you sell (or write) an option, you are giving someone else that right and taking on an obligation.
Options are traded on stocks, indexes (like Nifty 50 or Bank Nifty in India), commodities, currencies, and even cryptocurrencies in some global markets.
They are widely used by:
Investors to hedge portfolios.
Speculators to make money from price moves.
Institutions to manage large exposures.
Part 8 Trading Master Class Calls & Puts with Real-Life Examples
Call Option Example
Suppose Reliance stock is trading at ₹2,500.
You buy a Call Option with strike price ₹2,600, paying a premium of ₹50.
If Reliance goes to ₹2,800, your profit = (2800 - 2600 - 50) = ₹150 per share.
If Reliance stays below 2600, you lose only the premium = ₹50.
A call option = bullish bet (you expect prices to rise).
Put Option Example
NIFTY is at 22,000.
You buy a Put Option strike 21,800, premium ₹80.
If NIFTY falls to 21,200 → Profit = (21800 - 21200 - 80) = ₹520 per lot.
If NIFTY rises above 21,800, you lose only ₹80.
A put option = bearish bet (you expect prices to fall).
Why Traders Use Options
Options are powerful because they allow:
Leverage – Control large value with small money (premium).
Example: Buying Reliance stock directly at ₹2,500 may cost ₹2.5 lakh (100 shares). But buying a call option may cost just ₹5,000.
Hedging – Protect portfolio from losses.
Example: If you hold Infosys shares, you can buy a put option to protect against downside.
Speculation – Bet on market direction with limited risk.
Income generation – Selling options (covered calls, cash-secured puts) generates steady income.
PCR Trading StrategyMoneyness of Options
Moneyness shows whether the option has intrinsic value:
In the Money (ITM): Already profitable if exercised.
At the Money (ATM): Strike price = market price.
Out of the Money (OTM): No intrinsic value, only time value.
Factors Affecting Option Prices (Option Greeks)
Options are influenced by multiple factors:
Delta: Sensitivity to underlying price changes.
Gamma: Sensitivity of Delta.
Theta: Time decay – options lose value as expiry nears.
Vega: Sensitivity to volatility.
Rho: Sensitivity to interest rates.
Payoff Profiles
Buyer of Call/Put: Limited loss (premium), unlimited profit.
Seller of Call/Put: Limited profit (premium), unlimited or large risk.
Part 2 Support And ResistanceWhy Trade Options?
Leverage – You control large positions with small capital (premium).
Hedging – Protect portfolio from losses. (Insurance-like function).
Speculation – Bet on price movement (up, down, or sideways).
Income Generation – By selling options (collecting premiums).
Example in Real Life
Suppose you think Nifty (index) will go up:
Instead of buying Nifty futures (which needs big margin),
You buy a Nifty Call Option by paying just a small premium.
If Nifty rises, your profit multiplies due to leverage.
If Nifty falls, your maximum loss is only the premium paid.
In simple words: Options = flexibility + leverage + risk control.
They are widely used by retail traders, institutions, and hedgers across the world.
Part 1 Support And ResistanceWhat are Options?
Options are a type of derivative instrument in financial markets.
This means their value is derived from an underlying asset, such as stocks, indices, commodities, or currencies.
An option gives you the right, but not the obligation, to buy or sell the underlying asset at a predefined price (strike price) before or on a specific date (expiry date).
Types of Options
Call Option – Right to buy an asset at a fixed price before expiry.
Example: If you buy a call option of Reliance at ₹2,500, and the stock goes up to ₹2,700, you can still buy at ₹2,500 and profit.
Put Option – Right to sell an asset at a fixed price before expiry.
Example: If you buy a put option of Infosys at ₹1,500, and the stock falls to ₹1,300, you can still sell at ₹1,500 and profit.
Key Terms in Options
Premium – Price you pay to buy the option.
Strike Price – Pre-decided price at which you can buy/sell.
Expiry – The last date till which the option is valid.
ITM (In the Money) – Option has intrinsic value.
OTM (Out of the Money) – Option has no intrinsic value (only time value).