Option Market Trading Strategy, Options trading tips
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If you are new trader in option market. It must be necessary to know what is option market and How to trade in Option market.
What is an option?
An option is a contract giving the buyer the right, but not the obligation, to buy or sell an underlying asset (a stock or index) at a specific price on or before a certain date. An option is a derivative. That is, its value is derived from something else. In the case of a stock option, its value is based on the underlying stock (equity). In the case of an index option, its value is based on the underlying index (equity). An option is a security, just like a stock or bond, and constitutes a binding contract with strictly defined terms and properties.
How to trade in Option?
First analysis the market before the trading analysis the specific stock and particular company. It is vary important to knowledge about globle market and other market.
Strike price
The predetermined price upon which the buyer and the seller of an option have agreed is the strike price, also called the exercise price or the striking price. Each option on a underlying instrument shall have multiple strike prices.
In the money:
Call option - underlying instrument price is higher than the strike price.
Put option - underlying instrument price is lower than the strike price.
Out of the money:
Call option - underlying instrument price is lower than the strike price.
Put option - underlying instrument price is higher than the strike price.
At the money:
The underlying price is equivalent to the strike price.
There are investors who prefer to invest in option when the price is high due to a belief that the price will keep on going higher and they can make better profits. There are others who choose to buy the nifty option. Any investment in nifty options with other investments like cash stock, commodities.
If you are new trader in option market. It must be necessary to know what is option market and How to trade in Option market.
What is an option?
An option is a contract giving the buyer the right, but not the obligation, to buy or sell an underlying asset (a stock or index) at a specific price on or before a certain date. An option is a derivative. That is, its value is derived from something else. In the case of a stock option, its value is based on the underlying stock (equity). In the case of an index option, its value is based on the underlying index (equity). An option is a security, just like a stock or bond, and constitutes a binding contract with strictly defined terms and properties.
How to trade in Option?
First analysis the market before the trading analysis the specific stock and particular company. It is vary important to knowledge about globle market and other market.
Strike price
The predetermined price upon which the buyer and the seller of an option have agreed is the strike price, also called the exercise price or the striking price. Each option on a underlying instrument shall have multiple strike prices.
In the money:
Call option - underlying instrument price is higher than the strike price.
Put option - underlying instrument price is lower than the strike price.
Out of the money:
Call option - underlying instrument price is lower than the strike price.
Put option - underlying instrument price is higher than the strike price.
At the money:
The underlying price is equivalent to the strike price.
There are investors who prefer to invest in option when the price is high due to a belief that the price will keep on going higher and they can make better profits. There are others who choose to buy the nifty option. Any investment in nifty options with other investments like cash stock, commodities.
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