An option gives the buyer, the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price on or before a specified date, for which the buyer pays a premium. The option contract is a financial derivative, as it derives its value from the underlying asset.

Option contracts are non-linear in their payoffs as compared to futures.

There are two types of options traded on the Indian exchanges, namely:

Call Option gives Option Buyer, the right but not an obligation to buy the underlying shares on a predetermined date, at a predetermined price.

For example:  Nifty Call Option holder has the right to buy the index Nifty (Lot size or multiples of it) at the selected strike price on the expiry date.

Put Option gives Option Buyer, the right but not an obligation to sell the underlying shares on a predetermined date, at a predetermined price.

For example: Nifty Put Option holder has the right to sell the index Nifty (Lot size or multiples of it) at the selected strike price on the expiry date.

The seller of call option has an obligation to deliver the underlying asset upon exercise of the option by the buyer of the instrument. This is called a short call option position. The short call position holder carries the risk of unlimited losses, if the prices of the underlying were to rise above the strike price and limited profit, which is just the premium.

The seller of put option has an obligation to buy the underlying asset upon exercise of the option by the buyer of the instrument. This is called a short put option position. The short put position holder carries the risk of unlimited losses if the prices of the underlying were to fall below the strike price and limited profit, which is just the premium.

Also, note that the buyer of the option contract has the right, implying that he may or may not exercise the option. One must remember, the buyer is not under compulsion to exercise, he may choose to do it or not.

Later we shall learn about option greeks and NSE option chain which are useful decision enablers for traders, who wish to trade different types of options across different strike prices.

Trading in calls and puts is referred to as Option trading, these positions in calls or puts or combination of the two at different strike prices or same strike price depending on the underlying forecast or volatility forecast. The positions may be kept for intraday or a few days (positional options trading.

The European Call and Put options are available for trading, denoted as CE and PE options.

The approach to learning error free option trading from scratch to intermediate level is at Options Trading Certification Programme Online - Quantsapp

The buyer of the put option has the right to sell the underlying asset at the strike price (pre-determined price) with the expiry of the contract also pre-defined. For this, the buyer of the option pays an option premium to the option seller.
Example: NIFTY quotes at approximately 17314 on 6 Oct 2022.
NIFTY 17000 27 Oct 2022 PE means Nifty Put option with strike price of 17000 and expiry 27 Oct 2022.

Call option and put option are different derivatives of the same underlying, i.e. types of options. It depends on the market forecast or volatility forecast that a trader, establishes positions in calls or puts or combination of the two at different strike prices or same strike price. The positions may be kept for intraday or a few days (positional options trading).