Part 7 Trading Master Class

Basic Terminology

To understand option trading, one must know a few key terms:

Strike Price: The price at which the underlying asset can be bought (call) or sold (put).

Premium: The price paid by the buyer to the seller for the option contract.

Expiration Date: The date on which the option contract expires. In India, options typically expire every Thursday (for weekly options) or the last Thursday of the month (for monthly options).

In-the-Money (ITM): A call option is ITM when the market price is above the strike price; a put option is ITM when the market price is below the strike price.

Out-of-the-Money (OTM): A call is OTM when the market price is below the strike, and a put is OTM when the market price is above the strike.

At-the-Money (ATM): When the market price and strike price are roughly equal.