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Option contract is an agreement between two parties ie buyer and seller. when that contract is made,these two parties are agreeing to buy/sell the mentioned underlying asset ( it can be a stock/index) at the mentioned price(strike price),on a particular day (expiry day).
The option buyer pays a particular amount of money (option premium) to the option seller to make this contract.There is no obligation for the buyer to execute the transaction on expiry day, its optional (hence the name option). While the option seller has the obligation to execute the transaction, if the contract expires as "in the money". If the option expires as Out of the money ie worthless, the option seller gains the full premium.
Option basic concepts >Basics-of-Option-Trading > Must read for beginners >Option-trading-basic-terms-explained Option buying Vs Option selling >Options exercising-and-squaring-off >Option buyer and seller, formula to calculate profit at expiry Intrinsic value,extrinsic value and time decay >Margin requirement for option writing Hedging future positions with options |
Option advanced concepts Option Greeks - how does option price changes with underlying ?Option premium calculation , Fair value, over priced and under priced options >Option pricing and implied volatility Option pain theory Put call ratio analysis >Understanding the volatility index (India VIX) Put call parity and other option arbitrage methods > Portfolio hedging with options, perfect neutral Gamma and reverse gamma scalping |
Option Trading Strategies
| Bullish Strategies Long call short put covered call Covered straddle >Synthetic long stock Bull call spread Bull put spread Bull call diagonal spread Bull put diagonal spread Long bull collar short bull collar call calendar spread Call ratio spread | Bearish Strategies Short call Long put covered put >Synthetic Short stock Bear call spread Bear put spread Bear call diagonal spread Bear put diagonal spread Long bear collar short bear collar Bear Put calendar spread Put ratio spread | Neutral Strategies >Long strangle >Short strangle |
