Options Trading: Beginner to Advanced Guide Introduction What is Options Trading? Why Options are Popular in India (NSE, BSE markets). Benefits vs Risks of Trading Options. What are Options? Call Option (Right to Buy) Put Option (Right to Sell) Strike Price, Expiry, Premium
Key Terminologies Simplified ITM, ATM, OTM Lot size, Margin, Liquidity Option Chain (NSE Example)
INTRODUCTION Why Options are Popular in India (NSE, BSE markets).Benefits vs Risks of Trading Options.
Options trading is one of the most powerful tools in the stock market. Unlike stocks, where you buy or sell shares directly, options give you the right (but not obligation) to buy (Call) or sell (Put) an asset at a fixed price before expiry.
Low capital needed, high liquidity in Nifty /Bank Nifty, flexible for speculation & hedging, rising retail participation. Benefits: Leverage, hedging, multiple strategies, limited risk for buyers. Risks: Time decay, volatility swings, complexity, unlimited risk for sellers.
Benefits vs Risks of Trading Options
Benefits of Trading Options
Leverage → Control large positions with small
Risks of Trading Options
Benefits vs Risks of Trading Options
capital.
Flexibility → Profit in rising, falling, or
unlimited losses.
sideways markets.
Hedging Tool → Protect your portfolio from
Defined Risk (in buying) → Maximum loss is
Strategic Opportunities → Multiple strategies (calls, puts, spreads) for different market conditions.
Time Decay → Options lose value as expiry approaches.
Liquidity Issues → Some contracts have low volume → wider spreads.
the premium paid.
Complexity → Requires strong knowledge of
pricing, volatility, and Greeks.
adverse price moves.
High Risk in Selling (Writing) → Potential for
Over-Leverage → Temptation to trade big with small money can wipe out accounts.
What are Options? Call Option (Right to Buy)
A Call Option is a financial contract that gives the buyer the right to buy an asset (like a stock, index, or commodity) at a fixed price (strike price) within a specific time period.
Put Option (Right to Sell)
A Put Option is a financial contract that gives the buyer the right to sell an asset (stock, index, commodity, etc.) at a fixed price (strike price) within a specified time period.
Strike Price, Expiry, Premium
Strike Price → The fixed price at which you can buy (Call) or sell (Put).
Expiry → The last date to use the option; after that, it’s worthless. Premium → The cost paid to buy the option contract.
Key Terminologies Simplified
ITM (In The Money) → Option has intrinsic value (profitable if exercised now). ATM (At The Money) → Strike price = current market price. OTM (Out of The Money) → Option has no intrinsic value (not profitable yet).
Liquidity → How easily you can buy/sell an option without affecting its price.
Lot Size → Options are traded in lots, not single shares. Margin → Amount required in your trading account to take an option position
