Stock market Option trading: All you need to know

Call options allow the holder to buy the asset at a stated price within a specific timeframe and put options allow the holder to sell the asset at a stated price within a specific timeframe.

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There are two parties – the option seller (option writer) and the option buyer (option holder).

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The buyer of the option has the right, but not the obligation to exercise the contract and buy or sell the underlying asset at an agreed upon price.

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The option buyer pays a premium to the option seller for the right to exercise the option.

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

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