❓ Frequently Asked Questions
What is an option in stock market?
An option is a contract that gives the buyer the right, but not the obligation, to buy or sell a stock at a specific price (strike price) on or before a specific date (expiry). There are two types:
Call Option – Right to buy
Put Option – Right to sell
What is the difference between a Call and a Put option?
Call Option: You profit if the stock goes up.
Put Option: You profit if the stock goes down.
What is a strike price?
The strike price is the price at which you can buy (Call) or sell (Put) the underlying stock if you exercise the option.
What is option premium?
The premium is the price you pay to buy an option. It's calculated based on factors like stock price, time to expiry, volatility, etc.
What are Option Greeks?
Option Greeks are tools used to measure how different factors affect option prices:
Delta – Price movement sensitivity
Theta – Time decay
Vega – Volatility impact
Gamma – Delta's change rate
Rho – Interest rate sensitivity
Can I lose more than I invested in options?
Yes, option sellers (especially naked sellers) can face unlimited losses. However, buyers have limited risk—only the premium paid.
What is time decay in options?
Options lose value as they approach expiry. This is called time decay, represented by the Greek Theta. It works against buyers and favors sellers.
How do I know if an option is In-the-Money (ITM), At-the-Money (ATM), or Out-of-the-Money (OTM)?
ITM: Option has intrinsic value
ATM: Strike price ≈ stock price
OTM: No intrinsic value
For example, if stock is ₹100:
Call ₹90 = ITM
Call ₹100 = ATM
Call ₹110 = OTM
What is implied volatility (IV) in options?
IV represents the market’s forecast of future volatility. Higher IV means higher premium and higher risk/reward potential.
Is options trading suitable for beginners?
Options are powerful but risky. Beginners should:
Start with basic strategies
Avoid naked selling
Understand Greeks and risk management
What is the expiry date of an option?
It’s the last date on which the option can be exercised or settled. In India:
Weekly expiry: Thursdays
Monthly expiry: Last Thursday of the month
What are the best tools for options traders?
Popular tools include:
Sensibull – Strategy builder & live Greeks
Opstra – IV analysis & options dashboard
TradingView – Charting & indicator integration
What is a safe strategy to start with?
For beginners:
Covered Call
Cash Secured Put
Bull Call Spread
These limit both risk and reward—ideal for learning.
Do I need a lot of capital to trade options?
Not necessarily. Option buying requires less capital than buying shares, but selling options (especially naked) requires higher margins due to risk.
Can I exit an option before expiry?
Yes! You can exit (square off) your option position any time before expiry. You don’t need to hold till the last day.