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Stock Market KNOWLEGDE : OPTIONS TRADING key points for Stock Market beginners

Risks, Price Factors, and Market-Condition-Based Strategies for Retail Investors 1. What Is an Option? An option is a financial derivative that derives its value from an underlying asset such as a stock or index (NIFTY, BANKNIFTY, SENSEX). An option contract gives: the buyer the right (not obligation) the seller the obligation to buy or sell the underlying asset at a pre-defined price (Strike Price) on or before a specified expiry date . Types of Options: Call Option (CE) – Right to buy Put Option (PE) – Right to sell Options are traded for hedging, income generation, and directional views , but they carry significant risk , especially for uninformed participants. 2. Key Risks in Options Trading Options are not suitable for all investors . The primary risks include: a) Time Decay (Theta Risk) Option value erodes with time. If the market does not move in your favour, the premium  can decay rapidly , especially near expiry. b) Volatility Risk Option price...
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