1900 irrespective of the current stock price. 1900 gives you the right to purchase 505 Reliance shares at Rs. 72.50 for a particular strike price that has 505 underlying Reliance shares.Ī reliance call option with a strike price of Rs. Options give you the power to buy a higher number of shares for a small amount of money (called premium) in comparison to buying a stock.įor example, you can buy 1 call option contract of Reliance by paying Rs. In day trading options you simply buy/sell options without worrying about exercising the rights. Trading in options does not mean that you have to actually exercise the right at the buy/sell point. Whereas buying an option that gives you the right to sell shares before the expiry date is called a Put option. Options trading is also known as derivatives trading because the options contracts derive its value from the underlying instruments.īuying an option that gives you the right to buy shares before the expiry date is called a Call option.
Options trading is when you buy/ sell an options contract on a recognized stock exchange with the help of the online trading platform provided by your stockbroker. The upfront fees that you pay for buying an option contract is called the ‘Premium’ and What is Options Trading in India You can buy any underlying instrument such as stock, commodities, index, or forex for the option trading in India. The upfront money is called premium in case of Options trading and the contract price at which you are ready to buy the underlying security is called the ‘Strike’ price. In the case of real estate, the strike price was 30 lakh. 25 Lakhs then Shyam will not exercise the rights. 40 Lakhs, then Shyam benefits by exercising the right. If the mall comes up and the flat prices increase to Rs.
Shyam gets the right to buy or not to buy the flat within a period of five months and Ravi is bound by the contract to sell it only to Shyam. 30 Lakh (strike price) if he pays an upfront fee of Rs. Ravi gives Shyam an option (the right) to buy the flat at Rs. Shyam wants to buy the flat but does not want to pay more. 40 Lakhs.īut, if it wouldn’t happen then the real estate market price may come down to Rs. There is a likelihood of a mall coming up in the next five months which will drive the real estate price higher to Rs. 30 Lakh flat from Ravi on the outskirts of the city. Let’s understand option trading in India with an example. But you are not obliged to buy or sell the stock. Options Trading is a form of contract that gives you the right, to either buy or sell an amount of stock at a pre-determined price.
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