📘 Common Options Trading Terminologies Part - 1
🧩 1. Option
A contract that gives you the right, but not the obligation, to buy or sell an asset at a fixed price before expiry.
💰 2. Premium
The price you pay (if buying) or receive (if selling) for an option contract.
👉 Think of it like an insurance premium — it’s the cost of having the right.
📈 3. Call Option (CE)
A contract that gives you the right to buy an asset at a fixed price.
Buy Call → You expect price to go up.
📉 4. Put Option (PE)
A contract that gives you the right to sell an asset at a fixed price.
Buy Put → You expect price to go down.
🎯 5. Strike Price
The fixed price at which you can buy (Call) or sell (Put) the underlying asset.
⏳ 6. Expiry Date
The last day the option is valid. After this, it becomes worthless if not exercised.
⚖️ 7. In the Money (ITM)
An option that already has intrinsic value.
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Call Option → Spot price above strike price
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Put Option → Spot price below strike price
⚪ 8. At the Money (ATM)
When the spot price is almost equal to the strike price.
⚫ 9. Out of the Money (OTM)
An option that does not have intrinsic value.
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Call Option → Spot price below strike price
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Put Option → Spot price above strike price
💹 10. Underlying Asset
The stock, index, or commodity on which the option contract is based.
Example: NIFTY, BANKNIFTY, RELIANCE, etc.