Options7 min read
Options trading basics: what a call and a put actually are
A call is the right to buy, a put is the right to sell, and a premium is what that right costs. Here is what each side of an option contract is signing up for.
Options and futures
Implied volatilityoption price mein chhupi hui expected halchal
The market's expectation of how much the underlying will move, worked backwards from option prices; higher IV means costlier options.
Implied volatility, or IV, is the amount of future movement the option market is pricing in. It is derived from current option premiums using a pricing model, so it reflects what traders expect, not what has happened. When IV is high, options are expensive; when low, they are cheap. IV rises before events such as results, budgets and RBI policy, and typically falls sharply once the event passes, a drop called IV crush. Suppose SBI trades at ₹800 before results and the ₹800 call costs ₹25 with high IV. After results, SBI rises to ₹810, yet the call trades at ₹18, because IV collapsed and wiped out more than the gain from the move. Option buyers must be right on direction, timing and volatility. India VIX is the implied volatility index for Nifty. Compare a contract's current IV with its own history before buying.
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Lessons that use this term
Options8 min read
Lot size, expiry and margin: the three things every F&O beginner gets wrong
One Nifty lot is not one unit. Expiry is not just a date. Margin is not the price. Get these three straight before your first F&O order.