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.