Master class 9

. Introduction to Option Trading
Options are powerful derivative instruments that give buyers the right (not obligation) to buy or sell an underlying asset at a predetermined price within a specific time. They are commonly used for hedging, speculation, and income strategies.

There are two basic types:

Call Options: Right to buy

Put Options: Right to sell

Options derive value from stocks, indices (Nifty, Bank Nifty), commodities, or currencies and are traded on platforms like NSE in India.

2. Key Terminology in Option Trading
Strike Price: Price at which the option can be exercised

Premium: Cost of buying the option

Expiry: Last day the option is valid

Lot Size: Fixed number of underlying units (e.g., 50 for Nifty)

Intrinsic Value: Real value of an option if exercised now

Time Value: Portion of premium linked to time left before expiry

ATM/ITM/OTM: At The Money, In The Money, Out of The Money – defines moneyness of options