Introduction to Options Trading: Basics of Calls, Puts, and Key Terminology
By CapitalKeeper | Beginner’s Guide | Indian Equities | Market Moves That Matter
Options Trading Fundamentals
Objective:
Introduce readers to the world of options trading from the basics to real-world strategies so they can start using options for hedging or income generation.
📘 This Week : Options Trading Fundamentals – Daily Breakdown
🔹 Day 1: Introduction to Options Trading
- What are options? (Calls & Puts)
- Option terminology: Strike price, premium, expiry, ITM/OTM
- Differences between options and futures
🔹 Day 2: Understanding Option Greeks
- Delta, Gamma, Theta, Vega, Rho explained
- How Greeks influence pricing and strategy
- Real-life example using Nifty options
🔹 Day 3: Common Options Strategies
- Covered call, protective put, straddle, strangle
- When and why to use each
- Risk-reward matrix
🔹 Day 4: Intraday Option Trading Setup
- Open Interest analysis
- IV crush & event trading (like results/News)
- Selecting strike prices smartly
🔹 Day 5: Risk & Psychology in Options Trading
- Stop loss and position sizing
- Managing greed and fear in options
- Journaling and review
🎯 Objective:
Get introduced to the basics of options trading calls, puts, key terms, and how options differ from futures.
📘 What You’ll Learn Today: DAY- 1
1. ✅ What are Options?
- Options are financial contracts giving the right, not obligation, to buy or sell an asset at a predetermined price before expiry.
- Two main types:
- Call Option → Right to buy
- Put Option → Right to sell
2. 🔑 Basic Terminology:
| Term | Meaning |
|---|---|
| Strike Price | The price at which the option can be exercised |
| Premium | The cost paid to buy the option |
| Expiry Date | The date on which the option contract expires |
| ITM (In-the-Money) | Option has intrinsic value (profitable if exercised now) |
| OTM (Out-of-the-Money) | Option has no intrinsic value (not profitable yet) |
3. 🔄 Options vs Futures:
| Feature | Options | Futures |
|---|---|---|
| Obligation | No obligation (buyer’s choice) | Obligation for both parties |
| Risk | Limited for buyer, unlimited for seller | High risk for both sides |
| Premium Payment | Paid upfront | No upfront premium |
| Use Case | Hedging, speculation | Hedging, speculation |
🧠 Real-Life Example:
You buy a Nifty 25000 Call Option at ₹150 premium.
If Nifty rises to 25200 before expiry, your option is in the money, and you can profit.
💡 Quick Tip:
- Beginners should start with index options (like Nifty/Bank Nifty) due to better liquidity and low manipulation.
✅ Assignment:
- Open your broker’s options chain tool and check the strike prices, premiums, and OTM/ITM labeling.
- Watch a basic explainer video on how Call & Put options work.
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