Part 4 Institutional Trading

The Structure of an Option Contract

Every option contract has certain key components:

Underlying asset – The stock, index, or commodity the option is based on.

Strike price – The agreed-upon price at which the asset can be bought or sold.

Expiration date – The last date when the option can be exercised.

Premium – The cost paid by the buyer to the seller.

Lot size – The standardized quantity of the underlying represented by one option contract.

Example:
If you buy a Nifty 20,000 Call Option at ₹200 premium, one lot size is 50.

Total cost = ₹200 × 50 = ₹10,000.

You gain if Nifty moves above 20,200 (strike + premium).