📖 Basic Options Trading Terms
Call Option
Right (not obligation) to buy a stock/index at strike price before expiry. Profits when price rises.
Put Option
Right (not obligation) to sell a stock/index at strike price before expiry. Profits when price falls.
Strike Price
The fixed price at which you can buy (Call) or sell (Put) the underlying asset. Also called exercise price.
Premium
The price you pay to buy an option. Total cost = Premium × Lot Size. This is your maximum loss.
Expiry Date
Last date when option can be exercised. Weekly options expire Thursday, monthly options expire last Thursday of month.
Lot Size
Number of shares/index units in one option contract. Nifty = 50 units, Bank Nifty = 15 units.
Underlying Asset
The stock or index on which the option is based. For example, Nifty 50, Bank Nifty, Reliance, etc.
Options Chain
Table showing all available Call and Put options with different strikes and expiries, along with OI, volume, and Greeks.
💰 ITM, OTM, ATM - Moneyness Terms
ITM (In-the-Money)
Call: Strike < Current Price
Put: Strike > Current Price
Has intrinsic value. Higher premium, better probability.
ATM (At-the-Money)
Strike Price ≈ Current Price
Most liquid. Balanced premium. Best for beginners.
OTM (Out-of-the-Money)
Call: Strike > Current Price
Put: Strike < Current Price
No intrinsic value. Lower premium, needs big move.
🇬🇷 Options Greeks - Risk Metrics
Delta (Δ)
Price sensitivity. How much option price changes when underlying moves ₹1.
Call Delta: 0 to 1 | Put Delta: -1 to 0 | ATM ≈ 0.5
Gamma (Γ)
Rate of change of Delta. How fast Delta changes when price moves.
Highest near ATM. Measures Delta's sensitivity.
Theta (Θ)
Time decay. How much premium decreases per day as expiry approaches.
Always negative for buyers. Faster decay near expiry.
Vega (ν)
Volatility sensitivity. How much premium changes when IV moves 1%.
Higher Vega = More sensitive to volatility changes.
Rho (ρ)
Interest rate sensitivity. How premium changes with interest rate changes.
Less important in India. Usually very small effect.
🚀 Advanced Options Terminology
Open Interest (OI)
Total number of outstanding option contracts. High OI = Strong support/resistance level.
Volume
Number of contracts traded in a day. High volume = High liquidity, better execution.
Implied Volatility (IV)
Market's expectation of future price volatility. Higher IV = Higher premium prices.
Intrinsic Value
Actual profit if option is exercised now. Only ITM options have intrinsic value.
Time Value
Premium - Intrinsic Value. Extra value due to time remaining. Decays as expiry approaches.
Break-Even Point
Price where trade becomes profitable. Call = Strike + Premium | Put = Strike - Premium
Max Pain
Strike price where maximum options expire worthless. Price often moves toward max pain near expiry.
PCR (Put/Call Ratio)
Total Put OI / Total Call OI. PCR > 1 = Bearish sentiment, PCR < 1 = Bullish sentiment.
❓ Frequently Asked Questions
What are the most important terms for beginners?
Start with: Call, Put, Strike Price, Premium, Expiry, ITM/OTM/ATM, and Lot Size. These are the foundation of options trading.
Do I need to memorize all Greeks?
Focus on Delta and Theta first. Delta tells price sensitivity, Theta tells time decay. Gamma and Vega become important as you advance.
What's the difference between premium and strike price?
Strike price is the fixed price at which you can buy/sell. Premium is the price you pay to buy the option itself. They're completely different!
Practice Options Trading with Real Terms
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