Part6 Learn Institution Trading

Introduction to Options Trading
Options are like a financial “contract” that gives you rights but not obligations.
When you buy an option, you are buying the right to buy or sell an asset at a specific price before a certain date.
They’re mainly used in stocks, commodities, indexes, and currencies.

Two main types of options:

Call Option – Right to buy an asset at a set price.

Put Option – Right to sell an asset at a set price.

Key terms:

Strike Price – The price at which you can buy/sell the asset.

Expiration Date – The last day you can use the option.

Premium – Price paid to buy the option.

In the Money (ITM) – Option has intrinsic value.

Out of the Money (OTM) – Option has no intrinsic value yet.

At the Money (ATM) – Strike price equals current market price.

Options give traders flexibility, leverage, and hedging power. But with great power comes great “margin calls” if you misuse them.

Why Traders Use Options
Options aren’t just for speculation — they have multiple uses:

Speculation – Betting on price moves.

Hedging – Protecting an existing investment from loss.

Income Generation – Selling options for premium income.

Risk Management – Limiting losses through defined-risk trades.