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What is Options Trading?

Options trading is trading of option contracts of the underlying index or stock. An option contract gives the trader the right (not obligation) to buy or sell an index or stock at a Strike Price on or before an Expiry Date.

There are two types of option contracts – ‘Call Option’ and the ‘Put Option’.

What is a Call Option?

A call option is a type of contract that gives a trader the right to buy the underlying index or stock (eg. Nifty or Tcs) at a specific price called ” Strike Price” on or before a specified date known as “Expiry Date” (Every last Thursday of the month in NSE).

Why should you buy a Call Option?

When you are expecting a rise in the price of the index or stock you can buy a Call Option. The price of the Call Option will increase, when the stock price increases.

What is a Put Option?

A Put option is a type of contract that gives a trader the right to sell the
underlying index or stock (eg. Nifty or Tcs) at a specific price called ” Strike Price” on or before a specified date known as “Expiry Date” (Every last Thursday of the month in NSE).

Why should you buy a Put Option?

When you are expecting a fall in the price of an index or stock you can buy a Put Option. The Price of the Put Option will increase, when the stock price decreases.

Why most traders in the world prefer “Option Trading”?

When a trader “buy” a Call or Put Option “Profit is Unlimited and Risk is limited”.

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