Options trading entails buying and selling options contracts, which grant the holder the right—but not the obligation—to purchase or sell an underlying asset at a predetermined price on or before a particular date (expiry day). In India, NSE/BSE follows every Thursday  as option contract expiry day. There are two choices available: Put options (PE), that grant the holder the option to sell the underlying asset and Call options (CE) grant the holder the right to purchase the underlying asset.

Options can be used as a risk hedge, a way to make money, and a way to speculate on the direction that asset prices will go. However, it is essential to keep in mind that trading options involves substantial risk and may not be appropriate for all investors. Before engaging in this type of trading, traders must therefore comprehend the risks and mechanics of options.

Let's say, for example, that you think the price of XYZ stock will rise in the next month and it is currently trading at $50 per share. A call option with a strike price of $50 and an expiration date one month in the future could be purchased. This option's premium, or cost, could be $2 per share. You could exercise your option to buy the stock at the strike price of $50 and then sell it for the current market price of $60, earning a profit of $10 per share, if the price of XYZ stock rises to $60 before the option expires. On the other hand, the option will become worthless and you will lose the $2 premium you paid for it if the price of XYZ stock does not rise above $50 before the option expires. This shows how much money can be made or lost when trading options. Before making any trades on options, it's critical to carefully consider the risks and outcomes.