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CE & PE Basics
Chapter 1 of 5
An option gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a fixed price (the strike price) before or on a specific date (expiry). In India, options are European-style — exercisable only at expiry.
CE vs PE at a Glance
| Feature | Call Option (CE) | Put Option (PE) |
|---|---|---|
| Right gives you | Right to BUY at strike | Right to SELL at strike |
| Profitable when | Underlying RISES above strike | Underlying FALLS below strike |
| You buy when | Bullish on market/stock | Bearish on market/stock |
| Seller's view | Neutral to bearish | Neutral to bullish |
| Premium behaviour | Rises with underlying | Falls with underlying |
| Exercise at expiry | If spot > strike (CE) | If spot < strike (PE) |
💡Option Premium — What You Pay
When you buy a CE or PE, you pay a premium. This is the market price of the option contract. For Nifty, if a 22,000 CE trades at ₹150, and the lot size is 25, you pay ₹150 × 25 = ₹3,750 total. This is your maximum loss as a buyer — no matter what happens, you can't lose more than your premium.
Option = Insurance
Think of a Put Option like car insurance. You pay a small premium (cost). If something goes wrong (market falls), you get compensated. If nothing happens, you lose only the premium. The "insurance company" is the option seller.
NSE Stock Options: Physical Delivery
Stock options are physically settled from expiry (like stock futures). Deep ITM options near expiry can result in delivery obligations. Index options (Nifty, BankNifty) are always cash-settled.