We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.
Key takeaways from this chapter
- It makes sense to buy a call option only when one anticipates an increase in the price of an asset
- The strike price is the anchor price at which both the option buyer and option writer enter into an agreement
- The underlying price is simply the spot price of the asset
- Exercising an option contract is the act of claiming your right to buy the options contract at the end of the expiry
- Similar to futures contracts, options contracts also have an expiry. Options contracts expire on the last Thursday of every month
- Options contracts have different expiries – the current month, mid-month, and far month contracts
- Premiums are not fixed, in fact, they vary based on several factors that act upon it
- Options are cash-settled in India.
Amazing explanation ! The language is so simple, anyone can learn options trading. Thanks for enhancing learners confidence.
Glad you liked it, Pankaj. Happy learning 🙂
easy to understand…..
Video is very good but the music is distracting from the content.
Noted, will pass that as a feedback to editing team.
How to trading data live zerodha?
Every data point on Kite is live, Sanju.
hey karthik why there are different options with different strike price when there is only one spot/underlying asset price
eg; infosys has infy dec 1020 CE,infy dec 1060 CE etcc? why is that
The underlying is just one, but these are all bets that the underlying will or will not cross a price point. Hence different strikes.
In the example of land the premium was fixed.While in actual scenario the premium varies, so who decides this and how its value changes every second.
That’s market driven, Sanjay.
Great, So easy to understand
Happy learning!
hats off to u sir….
Hi Sir, Can we sell our call option before its expiry?
Yes, you can.
Hi Karthik, thanks for the video ! I have one doubt !! In the above example as you mentioned , If I buy SBI call option with strike rate – 460 , October expiry with 17 rupees premium ….and if sell once the premium reaches Rs 30 , before expiry , i will make the profit OR ‘ll the premium amount be deducted from the profit? Can you explain little bit more on selling before expiry part?
This will be a profit Suma. Check this – https://zerodha.com/varsity/chapter/options-m2m-and-pl/
That means we will be getting 1500 shares of SBI at a price of 460, and we will be required to pay 460*1500 if we want to comtinue with our option, right?
Yes, the settlement is based on the strik price you choose for the trade.
hyy sir my question is that there are different strike price in call and put option both. why are required different strike price and these different strike price so why is required and its affected the profit of any trader ?
Strike price is the price at which a contract is created and a trade happens. For example, I may feel that the stock may not cross 300 per share, and you may feel the stock may not cross 275 per share. So having different strikes enables us to be more specific in our point of view.