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
Thetahar din option ki keemat kitni ghat rahi hai
An option Greek measuring how much premium an option loses each day from the passage of time alone, with other factors unchanged.
Theta measures time decay. It tells you how many rupees an option's premium is expected to lose per day if the underlying price and volatility stay the same. Every option has time value that shrinks to zero at expiry, and theta is the daily rate of that shrinkage. If a Nifty 24,500 call quoted at ₹120 has a theta of minus 8, it should be worth about ₹112 tomorrow if Nifty does not move. Theta accelerates as expiry approaches, which is why options in their final days lose value quickly, and why weekly index options can be near worthless by expiry afternoon. Buyers pay theta every day; sellers collect it. This is the structural reason option buying loses money for most beginners: even when the direction is roughly right, a slow move lets theta eat the gains. Consider theta before buying any option.
Related terms
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.