PCR Trading Strategies

Introduction to Options Trading

The world of financial markets is vast, offering different ways to invest, trade, and manage risks. Among these instruments, Options have gained immense popularity because they offer flexibility, leverage, and unique strategies that regular stock trading cannot provide.

Options trading is not new—it has been around for decades in global markets—but in recent years, with the rise of online platforms and growing financial literacy, even retail traders are actively participating in it.

At its core, an option is a financial contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset (like a stock, index, currency, or commodity) at a predetermined price, within a certain period. This ability to choose—without compulsion—is what makes options unique compared to other financial products.

Basics of Options (Calls & Puts)

There are two main types of options:

Call Option: Gives the holder the right to buy the underlying asset at a fixed price (called the strike price) before or on the expiry date.

Example: You buy a Reliance call option with a strike price of ₹2500. If Reliance rises to ₹2700, you can buy at ₹2500 and gain from the difference.

Put Option: Gives the holder the right to sell the underlying asset at the strike price before expiry.

Example: You buy a Nifty put option with a strike price of 22,000. If Nifty falls to 21,500, your put gains in value since you can sell higher (22,000) while the market trades lower.

In simple terms:

Calls = Right to Buy

Puts = Right to Sell