Part 1 Ride The Big Moves

Key Terminologies in Options

Before diving deeper, you need to know the “language of options.”

Strike Price → The fixed price at which you can buy/sell (like 2500 in Reliance example).

Premium → The cost you pay to buy an option.

Expiry Date → Options have a life—weekly, monthly, quarterly. After expiry, they are worthless.

Lot Size → Options are not traded in single shares. They come in fixed quantities called lots (e.g., Nifty lot size = 50).

In the Money (ITM) → Option has intrinsic value.

Out of the Money (OTM) → Option has no value (only time value).

At the Money (ATM) → Strike price = Current market price.

How Option Prices Are Decided

Option premiums are not random. They are influenced by:

Intrinsic Value (IV) → Difference between current price and strike price.

Example: Reliance at ₹2600, Call 2500 → Intrinsic value = ₹100.

Time Value → More time till expiry = higher premium.

Volatility → If a stock is volatile, options are expensive because chances of big movement are high.

Interest rates & Dividends → Minor but relevant in longer-term options.