Part 1 Support and Resistance

Introduction to Options Trading

Trading in the stock market has many forms: buying shares, trading futures, investing in mutual funds, or speculating in commodities. Among all these, Options Trading is one of the most exciting and complex areas.

Options trading gives traders the right, but not the obligation, to buy or sell an underlying asset (like a stock, index, or commodity) at a fixed price before a fixed date.

In simple words:

If you buy a Call Option, you are betting that the price will go up.

If you buy a Put Option, you are betting that the price will go down.

Options give flexibility—traders can profit from rising, falling, or even sideways markets if they use the right strategies. That’s why they are called derivative instruments (their value is derived from an underlying asset).

What are Options? (Basics)

An Option is a financial contract between two parties:

Buyer (Holder): Pays a premium for the right (not obligation) to buy/sell.

Seller (Writer): Receives the premium and has an obligation to honor the contract.

There are two basic types:

Call Option (CE) – Right to buy.

Put Option (PE) – Right to sell.

Example:
Suppose Infosys stock is trading at ₹1500. You buy a Call Option with a strike price of ₹1550 expiring in 1 month. If Infosys goes above ₹1550, you can exercise your right to buy at ₹1550 (cheaper than market). If it doesn’t, you just lose the small premium you paid.

This flexibility is the beauty of options.