Part 2 Ride The Big MovesHow Options Work in Trading
Imagine a stock is trading at ₹1,000.
You believe it will rise to ₹1,100 in a month. You could:
Buy the stock: You need ₹1,000 per share.
Buy a call option: You pay a small premium (say ₹50) for the right to buy at ₹1,000 later.
If the stock rises to ₹1,100:
Stock profit = ₹100
Call option profit = ₹100 (intrinsic value) - ₹50 (premium) = ₹50 net profit (but with much lower capital).
This leverage makes options attractive but also risky — if the stock doesn’t rise, your premium is lost.
Categories of Options Strategies
Options strategies can be divided into three main categories:
Directional Strategies – Profit from price movements.
Non-Directional (Neutral) Strategies – Profit from sideways markets.
Hedging Strategies – Protect existing positions.
