What are Options?
Options are derivative contracts that give the buyer the right (but not obligation) to buy or sell an underlying asset at a predetermined price.
Types of Options
Call Option
Gives the right to BUY the underlying asset at strike price. Used when expecting price to rise.
Put Option
Gives the right to SELL the underlying asset at strike price. Used when expecting price to fall.
Key Terms
- Strike Price: Pre-determined price to buy/sell
- Premium: Price paid to buy option
- Expiry: Last day to exercise option
- Lot Size: Minimum quantity to trade
Options Trading Strategies for Beginners
- Covered Call: Safe strategy for income
- Protective Put: Insurance for holdings
- Bull Call Spread: Limited risk, limited profit
- Bear Put Spread: For falling markets
Risk Management
Options can be risky. Never risk more than 2% of capital per trade. Start with paper trading before using real money.