Futures options

Futures options

F1 Spot price

The stock trade price on BSE and NSE.

F2 Lot size

Number of shares to be delivered under one contract.

Ticker: Shares available at a low price have more shares in their lot, while high-value shares have smaller lot sizes.

Tip: Volume multiplied by closing price is turnover of a day.

F3 Volume

The number of shares traded on a particular day.

Ticker: High volume implies you can easily put through your buy and sell order.

Tip: Volume tends to be higher for volatile stocks.

F4 Open interest (OI)

Contracts currently active or which have not been terminated by early buying or selling.

Ticker: OI tends to be higher than the volume because open contracts show cumulative active positions for the maximum period of three months, while volume shows total trades on a given day.

Tip: If .both the price and OI move up, it shows a bullish trend of the stock. If both are down, it implies covering of buy and sell positions.

F5 % change in open interest

Change in open interest either confirms strong upward movement of price of a stock or a weak trend.

Ticker: An upward movement in percentage change in open interest and a downward movement of price imply that either old positions are covered or new short positions are created.

Tip: Higher OI implies that more people are holding on to the underlying stock.

F6 Number of contracts

Volume of buy and sell orders in a day represents the number of contracts put through.

Ticker: Number of contracts multiplied by lot size equals volume.

Tip: The higher the number of contracts, the more the liquidity of the stock.

An option is a contract that gives the buyer the right, but not the obligation, to buy or sell shares of the underlying security at a specific price on, or before, a specific date. It’s a two-party deal in which the buyer receives a privilege for which a premium is paid. The seller accepts an obligation for a fee

Types of options:

O1 Strike price

The price specified in the options contract, also called exercise price.

Ticker: If upon expiration, the spot price exceeds the strike price, an investor makes a profit.

Tip: The worst that can happen to the buyer is the loss of the premium paid.

O2 Expiry date

The last Thursday of the month, when an option expires, is expiry date.

Ticker: The longer the expiry date, the greater is an option’s time value, which is the difference between premium and its intrinsic value.

Tip: You can exercise your contract even before the expiry date.

O3 Call

The option gives the buyer or holder a right to buy an asset by a certain date and price for which they pay a premium. It works like a security deposit. If you want to rent property, you need put up a security deposit (premium money). In case of default (unexercised option), the security deposit is notrefunded.

Ticker: When you buy or sell a call option, the price you pay is called the option premium.

Tip: You buy or sell a call option when you are bullish/bearish on a stock.

O4 Put

Gives the holder the right, but not the obligation, to sell an asset by a certain date and price.

Ticker: When you buy or sell a put option, the price you pay is called the option premium.

Tip: Buying a put of Nifty is like insurance that insures you the full extent to which Nifty drops below the strike price of the put option.

O5 Contracts & open interest

Same as explained in futures.

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