Unlocking Investment Fundamentals
22 Chapters | Duration:9Option Basics
Master the fundamentals of options trading like calls, puts, pricing, volatility, and strategies which are designed for beginners keen to explore India’s derivatives market.
Course Objectives
Understand the basics of options trading
Learn calls, puts, and strike price concepts
Explore option moneyness and pricing factors
Interpret payoffs, volatility, and open interest
Apply strategies for buying and selling options
- Chapter - 14 mins read
Lessons in Options Trading
Options, in the context of the derivatives market, are contracts that grant the buyer the right, but not the obligation, to buy or sell an underlying asset at a predetermined price on a future date.
- Chapter - 27 mins read
Types of Options
Market movements are typically driven by either bullish (rising) or bearish (falling) sentiment. These trends serve as the foundation for two primary types of option contracts: call options and put options.
- Chapter - 35 mins read
Call Options
A call option, often denoted as CE, is a type of derivative contract that grants the buyer the right (but not the obligation) to purchase an underlying asset at a fixed price (called the strike price) within a specified timeframe (expiry period).
- Chapter - 48 mins read
Strike Price in Options Trading
In options trading, the strike price refers to the predefined rate at which the buyer has the right to buy (in a call option) or sell (in a put option) the underlying asset, within a set timeframe. It is also the price at which the contract can be exercised if the buyer chooses to do so.
- Chapter - 54 mins read
Open Interest in Options Trading
In the spot market, once a buyer and a seller execute a transaction, the trade is settled, and the contract ends. If the trade doesn’t go through during the session, it’s simply cancelled and needs to be reinitiated the next day.
- Chapter - 64 mins read
Option Expiry – Importance of Duration and Rollovers
Unlike equity shares or mutual funds, options contracts come with a defined lifespan. These contracts cease to exist after a pre-specified expiry date, set by the exchange. All open positions must be settled by the end of the trading session on expiry day, or as per exchange-defined timelines.
- Chapter - 76 mins read
Buying Options vs Selling Options
Options contracts are financial instruments derived from underlying assets like equities, currencies, commodities, or bonds. These contracts grant the buyer the right, but not the obligation, to buy or sell the asset at a predetermined price on or before a specified future date.
- Chapter - 84 mins read
Call Option Payoff Diagrams: Explained
Buying call options through m.Stock is one of the most straightforward entry points into the world of derivatives. The appeal lies not in unlimited returns alone but in the certainty that potential losses are capped. This balance of risk and reward can be easily visualised using payoff diagrams.
- Chapter - 94 mins read
Put Options: How to Profit from Falling Markets
When you expect weakness in the broader market or a specific stock, the instinctive strategy is to sell high and buy low. For example, if you believe the price of A Ltd will drop from ₹100 to ₹80, you might consider selling it now and repurchasing it later. This helps reduce your holding cost and allows you to stay invested in the long run. But there's a catch—you can only use this strategy if you already own the stock.
- Chapter - 103 mins read
Put Option Payoff Diagram Explained
In bearish or declining markets, traders commonly prefer buying put options over using Futures. Why? Because the risk in put options is predefined and limited to the premium paid. This makes it easier to manage your risk-reward balance, especially for directional trades.