Option Trading

How Options Work in Trading

Imagine a stock is trading at ₹1,000.
You believe it will rise to ₹1,100 in a month. You could:

Buy the stock: You need ₹1,000 per share.

Buy a call option: You pay a small premium (say ₹50) for the right to buy at ₹1,000 later.

If the stock rises to ₹1,100:

Stock profit = ₹100

Call option profit = ₹100 (intrinsic value) - ₹50 (premium) = ₹50 net profit (but with much lower capital).

This leverage makes options attractive but also risky — if the stock doesn’t rise, your premium is lost.

Categories of Options Strategies

Options strategies can be divided into three main categories:

Directional Strategies – Profit from price movements.

Non-Directional (Neutral) Strategies – Profit from sideways markets.

Hedging Strategies – Protect existing positions.

Directional Strategies

These are for traders with a clear market view.