Options
Options are financial instruments that are derivatives based on the value of underlying securities such as stocks. An options contract offers the buyer the opportunity to buy or sell—depending on the type of contract they hold—the underlying asset.
Call Options
Call Option value increases when security value increases & vice versa.
Put options
Option value increases when security value decreases & vice versa.
Investment
In simple terms, investment is the use of money to increase the future returns from such transaction.
Investment is the return of gain, the money in hand is capable to generate.
Equity market
There are 2 different markets for trading in equity.
They are Primary Market & Secondary Market.
Primary Market
is where the new equity is first traded.Secondary Market
is where all the primary equity is traded multiple times. Future & Options (F&O) are based on secondary market.Future trading
Obligation to sell/buy @predefined price& time; conditions remain standardized.
Forward Trading
Obligation to sell/buy @predefined price& time; conditions are customized.
ITM (in the money)
It simply means Realistic value (or) the difference between strike price and the stock price. It varies for the call and put options.
OTM (out the money)
It simply is the extrinsic value (or) the difference between premium and its intrinsic value. It varies for the call and put options.
ATM (at the money)
An ATM means that the strike price is equal to the stock price.
Premium
An option premium is the current market price of an option contract. It is a combination of time value and intrinsic value.
Hedging
Hedging generally is buying or selling a call option and a put option simultaneously (i.e.) taking up opposite position to safeguard the position we already hold.
Greeks
Greeks are the basics of how the options react to the market fluctuations, and how the price of the option is predicted.
