Part 7 Trading Master Class With Experts

How Options Work

Let’s take an example:

Suppose you buy a Call Option on Reliance Industries with a strike price of ₹2,500 and pay a premium of ₹50 per share.

If the stock rises to ₹2,600, you can exercise your right to buy at ₹2,500, making ₹100 profit per share (₹2,600 – ₹2,500), minus the premium (₹50). Net profit = ₹50.

If the stock falls below ₹2,500, you will not exercise the option. You lose only the premium of ₹50.

Similarly, a Put Option works the opposite way:

If you buy a Put Option with a strike price of ₹2,500 and the stock falls to ₹2,400, you can sell it at ₹2,500 and make a profit of ₹100 per share minus the premium.

This flexibility makes options a powerful tool for speculation and risk management.