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
Premiumoption kharidne ki keemat
The price paid by an option buyer and received by the seller for the contract, quoted per share and multiplied by the lot size for the actual cost.
The premium is the price of an option. The buyer pays it to the seller for the right the contract grants, and it is the most the buyer can lose. Premiums are quoted per unit; multiply by the lot size to get the cash amount. If a Nifty 24,500 call is quoted at ₹120 and the lot is 75, one lot costs ₹9,000. The premium has two parts: intrinsic value, the amount the option is already in the money, and time value, what traders pay for the chance that it moves further before expiry. Time value decays every day and reaches zero at expiry, which is measured by theta. Premiums rise with implied volatility and with time to expiry. Sellers collect the premium up front and keep it if the option expires worthless, but their potential loss is much larger than the premium.
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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.