Part 9 Trading Master Class

How Option Trading Works

Let’s take an example:

You buy a call option for a stock at a strike price of ₹100 for a premium of ₹5.

If the stock price rises to ₹120 before expiry, you can exercise your right to buy at ₹100 and sell at ₹120, earning ₹20 profit per share (minus ₹5 premium = ₹15 net profit).

If the price remains below ₹100, you simply let the option expire and lose only the premium paid (₹5).

This flexibility — limited loss and unlimited profit potential for buyers — is what makes option trading so attractive.