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.

Example of a Call Option

For 100 shares, you can purchase a TCS October call option at Rs 2000 strike price. The premium is Rs 200. You have the right to purchase 100 shares of TCS at Rs2000 anytime between now and October. This right is available by paying a premium of 100 X 200 shares = Rs 20,000. If the option price at expiry is greater than Rs 2100, you can exercise your options to earn profits. Let's say the option price is Rs 2150. You will receive-

 (strike and market price ) Rs 150  X 200 shares = Rs 30,000

Your profits will be Rs. 30,000 to Rs. 20,000 = Rs 10,000

If your option did not perform well during that time and was below Rs 2000, you can opt out. You will lose Rs 20,000 in premium.

Example of a put option

A Put option on TCS is purchased at Rs 2000 strike price. There is a premium Rs 100 for 100 shares. The option is purchased at a premium of Rs 100 X100 = Rs 10000. If the price of the TCS option is below the strike price, you can make profits selling the option. If the stock price is higher than the strike price, you can choose to not exercise the right and only lose the premium.