Part5 Institution Trading Stratergy

1. Introduction to Options Trading
Options trading is a powerful financial strategy that allows traders to speculate on or hedge against the future price movements of assets such as stocks, indices, or commodities. Unlike traditional investing, where you buy or sell the asset itself, options give you the right, but not the obligation, to buy or sell the asset at a specific price before a specified date.

Options are widely used by retail traders, institutional investors, and hedge funds for various purposes—ranging from hedging risk, generating income, or leveraging small amounts of capital for high returns.

2. Basics of Options
What is an Option?
An option is a derivative contract whose value is based on the price of an underlying asset. It comes in two forms:

Call Option: Gives the holder the right to buy the underlying asset.

Put Option: Gives the holder the right to sell the underlying asset.

Key Terms
Strike Price: The price at which the option can be exercised.

Premium: The price paid to buy the option.

Expiry Date: The last date the option can be exercised.

In-the-Money (ITM): Option has intrinsic value.

Out-of-the-Money (OTM): Option has no intrinsic value.

At-the-Money (ATM): Strike price is equal or close to the current market price.