Options Trading Basics for Global markets (NSE F&O Guide)
What is an Option?
An option is a contract that gives the buyer the right — but not the obligation — to buy or sell an asset at a specific price before a specific date.
In Global, options are traded on NSE under the F&O (Futures & Options) segment. The most popular: NIFTY options and BANKNIFTY options.
Call Option vs Put Option
Call Option
- Right to BUY the underlying at the strike price
- You buy a call when you expect the price to go up
- Maximum loss: the premium paid
- Maximum gain: unlimited
Put Option
- Right to SELL the underlying at the strike price
- You buy a put when you expect the price to go down
- Maximum loss: the premium paid
- Maximum gain: substantial (underlying can fall to zero)
Key Terms
Strike Price: The price at which you can buy/sell the underlying. NIFTY 24,700 CE means you have the right to "buy NIFTY at 24,700."
Premium: The price you pay for the option. If NIFTY 24,700 CE is trading at ₹80, you pay ₹80 × 50 (lot size) = ₹4,000 to buy one lot.
Lot Size: Options trade in lots. NIFTY lot size = 50. BANKNIFTY lot size = 15. You cannot buy a fraction of a lot.
Expiry: Options expire on the last Thursday of the month (monthly contracts) or every Thursday (weekly NIFTY/BANKNIFTY options).
ITM / ATM / OTM:
- ITM (In The Money): Strike price is favorable vs current price. E.g., NIFTY at 24,700 → 24,600 CE is ITM
- ATM (At The Money): Strike ≈ current price. Most actively traded.
- OTM (Out of The Money): Strike is unfavorable. E.g., NIFTY at 24,700 → 25,000 CE is OTM
The Option Greeks
| Greek | What it measures |
|---|---|
| Delta | How much option price changes for ₹1 move in underlying |
| Theta | Time decay — how much value the option loses each day |
| Vega | Sensitivity to change in implied volatility |
| Gamma | Rate of change of delta |
Theta is your enemy when you buy options. Every day that passes without movement, your option loses value. This is why experienced traders often prefer selling options.
Buying vs Selling Options
| Option Buyer | Option Seller | |
|---|---|---|
| Premium | Pays | Receives |
| Max profit | Unlimited | Premium received |
| Max loss | Premium paid | Unlimited |
| Theta | Works against | Works in your favour |
| Margin required | No | Yes (significant) |
How NIFTY Options Work (Example)
NIFTY is at 24,700. You expect it to rise by next Thursday.
You buy: NIFTY 24,750 CE (Call option, strike 24,750) at a premium of ₹60.
Cost: ₹60 × 50 (lot size) = ₹3,000
Scenario A — NIFTY rises to 25,000:
Your option is worth at least 25,000 − 24,750 = ₹250 intrinsic value.
Profit: (₹250 − ₹60) × 50 = ₹9,500
Scenario B — NIFTY stays at 24,700 or falls:
Your 24,750 CE expires worthless.
Loss: ₹3,000 (your entire premium)
Risk Warning
Options can expire completely worthless. Most retail option buyers lose money. Before trading real options:
- 1Paper trade options for at least 3 months
- 2Understand theta decay deeply
- 3Start with buying options (limited loss) before selling
- 4Never trade with money you cannot afford to lose
Use [NixPulse paper trading](/paper-trade) to practice F&O strategies with zero real risk.