Module 5   Introduction to Options Trading (Video Series)Chapter 2

Option Jargons

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2.1 – Decoding the basic jargon

Before we proceed into the depth of how Option trading works let us decode a few basic option jargons. Discussing these jargons at this stage will not only strengthen our learning but will also make the forthcoming discussion on the options easier to comprehend.

In the next video, we will attempt to understand the call option in a bit more detail.

We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.


Key takeaways from this chapter

  1. It makes sense to buy a call option only when one anticipates an increase in the price of an asset
  2. The strike price is the anchor price at which both the option buyer and option writer enter into an agreement
  3. The underlying price is simply the spot price of the asset
  4. Exercising an option contract is the act of claiming your right to buy the options contract at the end of the expiry
  5. Similar to futures contracts, options contracts also have an expiry. Options contracts expire on the last Thursday of every month
  6. Options contracts have different expiries – the current month, mid-month, and far month contracts
  7. Premiums are not fixed, in fact, they vary based on several factors that act upon it
  8. Options are cash-settled in India.

11 comments

  1. Pankaj Shelke says:

    Amazing explanation ! The language is so simple, anyone can learn options trading. Thanks for enhancing learners confidence.

  2. PARMOD ARORA says:

    easy to understand…..

  3. Rajish says:

    Video is very good but the music is distracting from the content.

  4. Sanju says:

    How to trading data live zerodha?

  5. Syed Rahel says:

    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

    • Karthik Rangappa says:

      The underlying is just one, but these are all bets that the underlying will or will not cross a price point. Hence different strikes.

  6. Sanjay Gahankar says:

    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.

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