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
Mark-to-market: the daily process of settling the profit or loss on open futures positions in cash based on that day's closing price.
Mark-to-market, or MTM, means valuing an open position at the current market price and settling the difference in cash every day. In futures, the exchange does this at the close: if your position gained, cash is credited to your account; if it lost, cash is debited from your margin. Suppose you bought one SBI futures lot of 750 shares at ₹800 and the futures close at ₹790. The MTM loss is ₹7,500, debited that evening, even though you have not sold. If SBI closes at ₹805 the next day, ₹11,250 is credited. This daily settlement is why futures losses can trigger margin calls before you ever exit. Brokers also show an MTM figure on intraday and options positions as an unrealised profit or loss. Understanding MTM stops the common shock of finding the account balance down after an ordinary red day.
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.
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.