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Options and Derivatives Trading involves financial instruments whose value is derived from underlying assets like stocks, commodities, currencies, or indices. They are commonly used for hedging, speculation, or enhancing portfolio returns.
 

1. Derivative:

   • A financial contract whose value depends on an underlying asset.

   • Types include Options, Futures, Forwards, and Swaps.

2. Options:

   • A type of derivative that gives the buyer the right (but not the obligation) to buy or sell an asset at a specified price within a set time.

   • Options are of two types:

     • Call Option: Right to buy the asset.

     • Put Option: Right to sell the asset.

3. Strike Price:

   • The predetermined price at which the option holder can buy or sell the underlying asset.

4. Expiration Date:

   • The date by which the option contract must be exercised or it expires worthless.

5. Premium:

   • The price paid by the buyer to the seller (writer) of the option.