ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -If you buy an options contract, it grants you the right but not the obligation to buy or sell an underlying asset at a set price on or before a certain date. A call option gives the holder the right to buy a stock and a put option gives the holder the right to sell a stock.

Detailed explanation-2: -With options, buying or holding a call or put option is a long position; the investor owns the right to buy or sell to the writing investor at a certain price. Conversely, selling or writing a call or put option is a short position; the writer must sell to or buy from the long position holder or buyer of the option.

Detailed explanation-3: -There are two types of options: Call Option & Put Option. Call Options: A Call Option gives buyer/holder the right but not the obligation to buy specified quantity of an underlying asset. Put Options: A Put Option gives buyer/holder the right but not the obligation to sell specified quantity of an underlying asset.

Detailed explanation-4: -An ITM option is one with a strike price that has already been surpassed by the current stock price. An OTM option is one that has a strike price that the underlying security has yet to reach, meaning the option has no intrinsic value.