options

          BASICS OF OPTIONS

There are two kinds of security markets of equity securities :-

1. EQUITY MARKET
2. Derivative Market

Equity Market consists of two types of trades

1. First buying shares and then selling as per our wish, it can be termed as normal trade.
2. Intraday sales : First selling at a price which is prevailing in market, then buying at same price.

Derivative Market have two types of trades 

1. Futures 
2. OPTIONS

Options are of two types 

1. calls
2. puts

Calls means "right to buy shares". Calls can be sold or bought means buying or selling "right to buy shares".For example If we write calls we receive call money that means we have sold right to buy a prica at certain price, ie buyer has right to buy shares at a contracted price.

Similarly Puts means "right to sell shares".
Trading in options means trading in right to buy or sell shares but not in shares.
we will learn more in later posts.