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170
Basic Concepts & Terminology

Before going deeper, let’s simplify the core terms in options trading:

Strike Price: The fixed price at which the buyer can buy (call) or sell (put) the asset.

Expiry Date: The date on which the option contract expires (e.g., weekly or monthly).

Option Premium: The cost paid by the buyer to the seller for getting this right.

Lot Size: Options are traded in lots, not single shares. Example: Nifty option lot = 50 units.

In-the-Money (ITM): When exercising the option is profitable.

Out-of-the-Money (OTM): When exercising the option is not profitable.

At-the-Money (ATM): When the strike price = current price of the underlying asset.

Example:
Suppose Reliance is trading at ₹2,500.

A Call option with strike 2,400 is ITM (because you can buy at 2,400, lower than 2,500).

A Put option with strike 2,600 is ITM (because you can sell at 2,600, higher than 2,500).

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