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Basics of Options Trading FAQs

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How to take decision on either to buy /sell call Option or put Option ?

Your market outlook will determine whether you decide to buy/sell put options or call calls. If you believe that the market will perform well in this month, then you can consider either 'BUY call Option' or "SELL put Option". If …

In Options , What is the meaning of At-The-Money , Out-of-the-Money (OTM) and In-The-Money ?

If the strike price is lower than the current price, it is called In-The-Money. A Put Option is a call option whose current price is less than its strike price. It is called In-The-Money. If the strike price is less …

What does European option mean? ?

A European option is an option contract which can only be exercised after its expiry date. All index options can be exercised as European types of Options.

What does American Options refers to ?

An American Option refers to option contracts that are available for exercise. You can sell or buy options at any time up to the expiry date. American options include options on specific companies such as Reliance and SBI.

When do you mean by Naked Options ?

Naked Options are when a trader makes a sale of an Option, but does not hold the underlying instrument. This is Known as Naked Options .

What do you mean by Covered Options ?

Covered Options are when a trader sells Option Reliance and simultaneously holds the underlying instrument. For example, a trader might sell SBI Option Reliance but also hold shares of SBI to enable the buyer to exercise the right.

How can the Options contracts be settled ?

All options contracts must be settled in cash daily and at the expiration date. Traders do not need to own stocks.

Do I have to pay margin in Options ?

You don't have to pay a margin when you purchase Options contracts. Your loss is minimal. A premium amount is required. Your loss will be reduced by the premium. You must pay a margin requirement when you sell Options contracts. …

What will happen when an option expires out of money ?

Two scenarios are possible: When the Call Option is no longer available The Put Option is no longer available. A call option expires out-of-the-money:A call options is considered Out of The Money (OTM), if its strike price exceeds the current …

How Nifty can be traded ?

Nifty can be traded in the same manner as any other Option. Nifty is an Index Option. An Index is a group of stocks, such as Nifty 50 or NSE Bank Nifty. The Nifty Option is calculated from the Nifty. …

How futures and Options are different ?

Options and futures are two types of derivatives. The underlying instrument that gives derivatives their value, such as a stock or commodity, is what they are worth. The fundamental difference between Futures and Options lies in the obligations that buyers …

What is the process for trading options ?

Broking firms that are members of NSE or BSE can trade options contracts. Many trading members now offer online and mobile trading platforms for trading in the options market. To open an account at one of these broking firms, you …

When does Options expire?

Each Option has an expiration date. You may exercise your right to sell/buy up until this date. The last Thursday in each month is the expiration day. If the holiday falls on a Thursday, the contract will expire on the …

What is strike price of option ?

The strike price (also known as purchase price) is the price at the option's underlying instrument can be bought. It is the price at the which an underlying instrument is available for purchase. For a call option it is the …

How many types of Options ?

There are two types of options: Call Options, and Place Options. Call Options allow you to purchase an option contract, but not with the obligation. Option Contracts You have the option, but not the obligation to, sell an option contract. …

What is the work of Options ?

Options are derivatives of underlying financial instruments like stocks, commodities and currencies. An example is curd, which is a derivative from milk. Just as an increase or decrease in milk price affects curd's price, so does the price movement of …

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