Option jargon, decoded
Strike, premium, expiry, lot size, CE/PE — read any contract name in seconds.
Reading a contract name
Every option has a name that packs in everything you need. Here's how to read one:
So NIFTY 06 OCT 22400 CE reads as: "a call option on NIFTY, expiring 6 October, with strike 22,400."
The words you'll see every day
— the thing the option is built on: an index like NIFTY, BANKNIFTY or SENSEX, or a stock like Reliance or HDFC Bank.
Spot price — the underlying's current price. If NIFTY is trading at 22,421.95 right now, that's the spot.
— the fixed price written into the contract. Exchanges list many strikes, usually in steps (50 points for NIFTY), so you can choose how far from the current price you want to be. All of them, side by side, form the .
— the price of the option, quoted per unit. "The 22400 CE is at ₹175" means one unit costs ₹175.
— options trade in fixed bundles. NIFTY's lot size is 65 units (exchanges revise this from time to time — the strategy builder shows the current one). So:
— the last day of the contract. NIFTY has weekly expiries (every Tuesday) and monthly expiries (the last Tuesday of the month). Stock options only have monthly expiries. If an expiry falls on a holiday, it moves to the previous trading day.
Contract value — strike × lot size. For the 22400 CE that's 22,400 × 65 = ₹14,56,000. It's the size of the position you are "controlling", even though you only paid ₹11,375 in premium.
Buyer and seller words
| Word | Means |
|---|---|
| Long / buyer / holder | You bought the option. You paid premium, you own a right. |
| Short / seller / | You sold the option. You received premium, you carry an obligation. |
| Square off | Close your position by doing the opposite trade (sell what you bought, buy back what you sold). |
| Money the broker blocks from a seller as security. Buyers only pay the premium. | |
| Exercise | Using the right at expiry. Happens automatically for in-the-money options in India. |
Where the premium comes from
You can't negotiate a premium with the seller — it's set by the market, through buyers and sellers bidding on the exchange, just like a share price. That's why the option chain shows bid (the best price someone will pay you) and ask (the best price someone will sell to you).
What makes buyers willing to pay more or less? Four things, which you'll meet properly in Module 2:
- How far the spot is from the strike — a call with the spot already above the strike is worth more.
- How much time is left — more time, more chance of a move, higher premium.
- How jumpy the market is (volatility) — wilder markets mean pricier options.
- Interest rates — a small effect, mostly ignorable for weekly options.
Quick check
Suppose an option's premium is ₹220 and its lot size is 30. How much do you pay for 2 lots?
Quick check
What does 'PE' at the end of a contract name tell you?