Part 6 Learn Institution Trading

1. Introduction to Options Trading
Options trading is a fascinating and powerful segment of the financial markets. Unlike buying stocks directly, options offer flexibility, leverage, and a wide variety of strategic choices. But with that power comes complexity and risk.

What Are Options?
An option is a contract that gives the buyer the right (but not the obligation) to buy or sell an underlying asset (like a stock, index, or ETF) at a specific price (strike price) before or on a specific date (expiry date).

Two Types of Options:
Call Option – Right to Buy

Put Option – Right to Sell

🧩 2. The Key Components of an Option Contract
Before diving into strategies and profits, let’s break down the essential parts of any option:

Component Description
Underlying Asset The stock, index, or commodity the option is based on
Strike Price The pre-defined price at which the buyer can exercise the option
Expiry Date The date on which the option contract expires
Premium The price paid by the buyer to purchase the option