CALL  OPTION

Aryan Bought a Call Option CE of the Nifty50 Index at a value of 16000, monthly expiry at the start of the month from Bharat at ₹100/- premium.

• Here Aryan is the Buyer or Holder of the Option.
•  Bharat is the Seller or Writer of the Option.
  
•  Nifty50 is the underlying asset value of the asset is 16000.
  
•  The contract to be exercised is at the end of the month (generally on the last Thursday of the month).
  
•  16000 is the price to be paid by Aryan at the end of the month, this is called the strike price or exercise price.
  
•  Aryan may or may not exercise his right to buy at 16000 at the end of expiry. If Aryan exercises his right, then Bharat must sell the Nifty 50 at 16000 to Aryan.
  
•  The amount paid for purchasing the right here is 100 it is called Option Premium. (We can also think of it as a small advance amount paid for reservation).
  
•  On the date of expiry, if Nifty 50 was gone to 16250 if Aryan exercises his right, he will sell 16000 and get, he will get a profit of (16250-16000-100) = 150, on the other hand, Bharat earns 100 premium but must sell Nifty50 at 16000 which will result from a loss of (16250-16000-100) = 150.
  
•  If the Nifty50 was gone to 15750, Aryan won’t exercise his right as he can buy the Nifty50 at 15750 which was less than the agreed price, as he has a right but not the obligation, he will not exercise his right, the loss only will be the premium amount paid ₹100/-. The ₹100/- premium paid to Bharat will be regarded as profit to Bharat.
  

PUT OPTION

Aryan Bought a Put Option PE of the Nifty50 Index at a value of 16000, monthly expiry at the start of the month from Bharat at ₹100/- premium.

• Here Aryan is the Buyer or Holder of the Option.
•  Bharat is the Seller or Writer of the Option.
  
•  Nifty50 is the underlying asset value of the asset is 16000.
  
•  The contract to be exercised is at the end of the month (generally on the last Thursday of the month).
  
•  16000 is the price to be paid by Aryan at the end of the month, this is called the strike price or exercise price.
  
•  Aryan may or may not exercise his right to buy at 16000 at the end of expiry. If Aryan exercises his right, then Bharat must sell the Nifty 50 at 16000 to Aryan.
  
•  The amount paid for purchasing the right here is 100 it is called Option Premium. (We can also think of it as a small advance amount paid for reservation).
  
•  On the date of expiry, if Nifty 50 was gone to 15750 if Aryan exercises his right, he will sell the Nifty50 of 16000, he will get a profit of (15750-16000-100) = 150, on the other hand, Bharat earns 100 premium but must purchase Nifty50 at 16000 which will result from a loss of (15750-16000-100) = 150.
  
•  If Nifty50 has gone to 16250, Aryan won’t exercise his right as he can sell the Nifty50 at 15750 which was less than the agreed price, as he has a right but not the obligation, he will not exercise his right, the loss only will be the premium amount paid ₹100/-. The ₹100/- premium paid to Bharat will be regarded as profit to Bharat.