Part 2 Intraday Master Class

Key Concepts and Terminology

Before understanding how option trading works, it’s important to grasp some basic terms:

Call Option: Gives the holder the right to buy an asset at a specific price (called the strike price) before a set date.

Put Option: Gives the holder the right to sell an asset at a specific strike price before a set date.

Strike Price: The predetermined price at which the underlying asset can be bought or sold.

Premium: The price paid to purchase an option contract. It represents the cost of owning the right to buy or sell.

Expiration Date: The date on which the option contract expires. After this date, the option becomes void.

In-the-Money (ITM): When exercising the option would result in a profit.

Out-of-the-Money (OTM): When exercising the option would not be profitable.

At-the-Money (ATM): When the asset’s market price is equal (or nearly equal) to the strike price.

Underlying Asset: The financial instrument on which the option is based—commonly a stock, index, or commodity.