Part 3 Learn Institutional Trading

What Are Options?

An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a predetermined price—known as the strike price—before or on a specific date called the expiry.

There are two types of options:

Call Option – Gives the right to buy an asset.

Put Option – Gives the right to sell an asset.

The buyer of an option pays a fee called the premium, which is the price of the contract.

In India, stock options follow an American-style exercise, allowing early exercise, while index options are European-style, meaning they can only be exercised on expiry day.