InvestorQ : Can you explain how exactly do options trading work in India and the key difference between index and stock call options?
Nishant Chandani made post

Can you explain how exactly do options trading work in India and the key difference between index and stock call options?

Answer
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Abhi Yadav answered.
1 year ago


In India all options are cash settled! What does that mean? It means that on the settlement date the profits will be adjusted in cash. Just because you have a TCS call option you cannot go to the exchange and demand that you get delivery of shares of TCS. Call options will be available in near-month, mid-month and far-month contracts. Remember, all call option contracts will expire on the last Thursday of the month. Let us not look at the key differences between index call options and call options on individual stocks.

An index call option is the right to buy an index and the profit/loss will depend on the movement in the index value. Thus you have Nifty Calls, Bank Nifty calls etc. Stock options are options on individual stocks. Thus you have call options on Reliance Industries, Tata Steel, Infosys, and Adani SEZ etc. The principle of trading call options in both cases is the same. You buy call options when you expect the price of the stock or index to go up.