Options trading grants you the right or obligation to buy or sell a particular security at a predetermined price on a specified date. An option is a contract tied to an underlying asset, such as a stock or another security.

Here, we've discussed all an investor needs to know about trading options, option strategies and more.

What is Option trading

Option trading gives the buyer the right but not the obligation to buy (call option) or sell (put option) a certain underlying asset at a predetermined price within a stipulated period. Options trading involves strategies that provide traders with various market positions to make gains or mitigate the spot market risk.

How does options trading work?

Whenever an options trader is buying or selling options, he/she receives a right, but not an obligation, to exercise an option before expiration. The purchase and sale of an option contract do not mandatorily need to be executed; if the position gets unfavorable, one can simply avoid executing