Part 6 Learn Institutional Trading

Key Terminology in Option Trading

Before trading options, understanding the terminology is crucial:

Underlying Asset: The financial asset (e.g., Nifty 50 index, stock, commodity) on which the option is based.

Strike Price: The fixed price at which the option holder can buy or sell the underlying asset.

Premium: The price paid by the buyer to the seller for obtaining the rights of the option.

Expiration Date: The date on which the option contract expires.

In-the-Money (ITM): When exercising the option would be profitable.

Out-of-the-Money (OTM): When exercising the option would not be profitable.

At-the-Money (ATM): When the market price equals the strike price.