Basics of Options Trading FAQs

How Stock trading is different from Options trading ?

Option trading is where you purchase a contract that gives you the right, but not the obligation, to buy the underlying at a specific price within a certain time period. Stocks trading allows you to buy shares that allow you to have a partial ownership of a company.

Options Trading Vs Stocks Trading

Options Trading

Stocks Trading

The premium is only a fraction of what the underlying costs.

Stocks are sold at the current price.

Profitable movements of the underlying can be either downward, upward or sideways.

Except in intraday trading, you profit from the upward movement of the underpinning.

You can manage risk.

There is no limit to the risk.

It is a time-definite period.

It can be kept as long as you like.

This includes no delivery or cash settlement.

This includes the delivery of stocks.


What is the work of Options ?

How many types of Options ?

What is strike price of option ?

When does Options expire?

What is the process for trading options ?

How futures and Options are different ?

How Nifty can be traded ?

What will happen when an option expires out of money ?

Do I have to pay margin in Options ?

How can the Options contracts be settled ?

What do you mean by Covered Options ?

When do you mean by Naked Options ?

What does American Options refers to ?

What does European option mean? ?

In Options , What is the meaning of At-The-Money , Out-of-the-Money (OTM) and In-The-Money ?

How to take decision on either to buy /sell call Option or put Option ?

Is it possible to trade on option of any stock or index?

How Square off and exercise an Option is different ?

What does intrinsic value of an option mean and how to calculate intrinsic value of an option ?

What does time value of an Option mean ?