What are options? Calls and puts explained simply
Options are contracts that give the right to buy or sell at a set price. Learn calls, puts and how to practise options risk-free.
An option is a contract that gives you the right (not the obligation) to buy or sell an underlying (like NIFTY) at a fixed strike price before a set expiry. You pay a premium for that right.
The two types
- Call option (CE): the right to buy — you profit when the price rises.
- Put option (PE): the right to sell — you profit when the price falls.
See the full comparison in call vs put options.
Why trade options?
- Leverage: a small premium controls a large position.
- Defined risk (when buying): the most you can lose buying an option is the premium.
- Flexibility: profit in up, down, or sideways markets with strategies.
Practise risk-free
The safest way to learn options is paper trading — real prices, virtual money. Open the option chain and try a call or put.
FAQ
What is a premium?
The price you pay to buy an option (per unit × lot size). It's the maximum you can lose as a buyer.
Are options risky?
Buying options has defined risk (the premium); selling them has larger risk and needs margin. Practise first.
Where do I learn more?
Start with call vs put and option greeks.