{"id":73032,"date":"2025-06-03T21:45:35","date_gmt":"2025-06-03T16:15:35","guid":{"rendered":"https:\/\/www.5paisa.com\/finschool\/?post_type=markets&#038;p=73032"},"modified":"2025-06-03T21:55:16","modified_gmt":"2025-06-03T16:25:16","slug":"options-risk-graphs-itm-atm-otm-chapter-2","status":"publish","type":"markets","link":"https:\/\/www.5paisa.com\/finschool\/course\/complete-guide-to-options-buying-and-selling\/options-risk-graphs-itm-atm-otm-chapter-2\/","title":{"rendered":"Options Risk Graphs\u2013 ITM, ATM, OTM-Chapter 2"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"73032\" class=\"elementor elementor-73032\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-23ba90b elementor-section-full_width tab_container elementor-section-height-default elementor-section-height-default\" data-id=\"23ba90b\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container 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data-id=\"33d4575\" data-element_type=\"widget\" data-widget_type=\"shortcode.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<div class=\"elementor-shortcode\">\t<script>\n\t\tjQuery(document).ready(function(){\n\t\t\tjQuery(\"#post_chapters a[href*='\" + location.pathname + \"']\").addClass(\"current\");\n\t\t})\n\t<\/script>\n\t<div class=\"desktop_chapters\"><div id=\"post_chapters\"><div class=\"post_chapters-heading\">Chapters<\/div><ul><li><i class=\"fa fa-chevron-right\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/complete-guide-to-options-buying-and-selling\/call-and-put-options-a-beginners-guide-to-options-trading\/\">Call and Put Options-A Beginner\u2019s Guide to Options Trading<\/a><\/li><li><i class=\"fa fa-chevron-right\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/complete-guide-to-options-buying-and-selling\/options-risk-graphs-itm-atm-otm-chapter-2\/\">Options Risk Graphs\u2013 ITM, ATM, OTM<\/a><\/li><li><i class=\"fa fa-chevron-right\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/complete-guide-to-options-buying-and-selling\/beginners-guide-to-time-decay-implied-volatility-chapter-3\/\">Beginner\u2019s Guide to Time Decay & Implied Volatility<\/a><\/li><li><i class=\"fa fa-chevron-right\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/complete-guide-to-options-buying-and-selling\/all-about-options-greek-chapter-4\/\">All About Options Greek<\/a><\/li><li><i class=\"fa fa-chevron-right\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/complete-guide-to-options-buying-and-selling\/how-to-generate-passive-income-through-options-selling-chapter-5\/\">How to Generate Passive Income through Options Selling<\/a><\/li><li><i class=\"fa fa-chevron-right\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/complete-guide-to-options-buying-and-selling\/buying-selling-call-and-put-options-chapter-6\/\">Buying\/Selling Call and Put Options<\/a><\/li><li><i class=\"fa fa-chevron-right\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/complete-guide-to-options-buying-and-selling\/options-market-structure-strategy-box-case-studies-chapter-7\/\">Options Market Structure, Strategy Box, Case Studies<\/a><\/li><li><i class=\"fa fa-chevron-right\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/complete-guide-to-options-buying-and-selling\/adjustments-for-single-options-chapter-8\/\">Adjustments for Single Options<\/a><\/li><li><i class=\"fa fa-chevron-right\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/complete-guide-to-options-buying-and-selling\/using-stock-and-options-combo-strategies-for-investors-chapter-9\/\">Using Stock and Options combo 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<div data-scroll-on-click=\"no\" data-scroll-speed=\"300\" id=\"eael-advance-tabs-90f6d06\" class=\"eael-advance-tabs eael-tabs-horizontal eael-tab-auto-active \" data-tabid=\"90f6d06\">\n            <div class=\"eael-tabs-nav\">\n                <ul class=\"eael-tab-inline-icon\" role=\"tablist\">\n                                            <li id=\"study\" class=\"active-default eael-tab-item-trigger eael-tab-nav-item\" aria-selected=\"true\" data-tab=\"1\" role=\"tab\" tabindex=\"0\" aria-controls=\"study-tab\" aria-expanded=\"false\">\n                            \n                                                                <i class=\"far fa-edit\"><\/i>                                                            \n                                                            <span class=\"eael-tab-title title-after-icon\" >Study<\/span>                            \n                                                    <\/li>\n                                            <li 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          \n                                                            <span class=\"eael-tab-title title-after-icon\" >Videos<\/span>                            \n                                                    <\/li>\n                                    <\/ul>\n            <\/div>\n            \n            <div class=\"eael-tabs-content\">\n\t\t        \n                    <div id=\"study-tab\" class=\"clearfix eael-tab-content-item active-default\" data-title-link=\"study-tab\">\n\t\t\t\t        <p><div class='white' style='background:rgb(255, 255, 255); border:solid 0px rgb(255, 255, 255); border-radius:0px; padding:0px 0px 0px 1px;'>\n<div id='text_slider' class='owl-carousel sa_owl_theme owl-pagination-true' data-slider-id='text_slider' style='visibility: visible;visibility:visible;'>\n<div id='text_slider_slide01' class='sa_hover_container' data-hash='What-Are-ITM-ATM-and-OTM-Options ' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; '><h2>2.1 <strong><b>What Are ITM, ATM, and OTM Options?\u00a0<\/b><\/strong><\/h2>\r\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"aligncenter wp-image-72944 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/What-are-Options-Greek.png\" alt=\"What Are ITM, ATM, and OTM Options? Definitions and Examples\" width=\"885\" height=\"685\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/What-are-Options-Greek.png 885w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/What-are-Options-Greek-300x232.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/What-are-Options-Greek-768x594.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/What-are-Options-Greek-50x39.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/What-are-Options-Greek-100x77.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/What-are-Options-Greek-150x116.png 150w\" sizes=\"(max-width: 885px) 100vw, 885px\" \/><\/p>\r\n<h3><strong><b>In the Money (ITM):<\/b><\/strong><\/h3>\r\n<ul>\r\n<li><b><\/b><strong><b>Call Option:<\/b><\/strong>A call option is &#8220;in the money&#8221; when the strike price is below\u00a0the current market price of the underlying asset. This means exercising the option would allow the buyer to purchase the asset at a lower price than its current market value.<\/li>\r\n<li><b><\/b><strong><b>Put Option:<\/b><\/strong>A put option is &#8220;in the money&#8221; when the strike price is above\u00a0the current market price of the underlying asset. This means exercising the option would allow the buyer to sell the asset at a higher price than its current market value.<\/li>\r\n<\/ul>\r\n<h3><strong><b>At the Money (ATM):<\/b><\/strong><\/h3>\r\n<p>An option is considered &#8220;at the money&#8221; when the strike price is equal to or very close to\u00a0the current market price of the underlying asset. In this case, exercising the option results in no intrinsic profit.<\/p>\r\n<h3><strong><b>Out of the Money (OTM):<\/b><\/strong><\/h3>\r\n<ul>\r\n<li><b><\/b><strong><b>Call Option:<\/b><\/strong>A call option is &#8220;out of the money&#8221; when the strike price is above\u00a0the current market price of the underlying asset. Exercising it would mean buying the asset at a price higher than its market value, which isn&#8217;t profitable.<\/li>\r\n<li><b><\/b><strong><b>Put Option:<\/b><\/strong>A put option is &#8220;out of the money&#8221; when the strike price is below\u00a0the current market price of the underlying asset. Exercising it would mean selling the asset at a lower price than its market value, which also isn&#8217;t profitable.<\/li>\r\n<\/ul>\r\n<h2><strong><b>Example as per ITM, ATM and OTM with respect to Power Sector<\/b><\/strong><\/h2>\r\n<h4><strong><b>In the Money (ITM):<\/b><\/strong><\/h4>\r\n<p>Imagine a call option for electricity priced at \u20b95 per unit, while the current market price is \u20b96 per unit. This option is &#8220;in the money&#8221; because exercising it allows the buyer to purchase electricity at \u20b95, which is cheaper than the market price.<\/p>\r\n<p>Similarly, a put option priced at \u20b97 per unit is &#8220;in the money&#8221; if the current market price is \u20b96 per unit. Exercising this option lets the seller sell electricity at \u20b97, higher than the market price.<\/p>\r\n<h4><strong><b>At the Money (ATM):<\/b><\/strong><\/h4>\r\n<p>If the strike price of the option is \u20b96 per unit and the current market price is also \u20b96 per unit, the option is &#8220;at the money.&#8221; Exercising it would result in no intrinsic profit.<\/p>\r\n<h4><strong><b>Out of the Money (OTM):<\/b><\/strong><\/h4>\r\n<p>A call option priced at \u20b97 per unit is &#8220;out of the money&#8221; if the current market price is \u20b96 per unit. Exercising it would mean buying electricity at \u20b97, which is more expensive than the market price.\u00a0\u00a0A put option priced at \u20b95 per unit is &#8220;out of the money&#8221; if the current market price is \u20b96 per unit. Exercising it would mean selling electricity at \u20b95, which is lower than the market price.<\/p><\/div>\n<div id='text_slider_slide02' class='sa_hover_container' data-hash='ITM-vs-ATM-vs-OTM-Options\u2013Risk-Graphs-Explained' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; '><h2><strong><b>2.2 <\/b><\/strong><strong><b>ITM vs ATM vs OTM Options \u2013 Risk \u00a0Graphs Explained<\/b><\/strong><\/h2>\r\n<p><img decoding=\"async\" class=\"aligncenter wp-image-72945 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-vs-ATM-vs-OTM-Options-\u2013-Risk-Graphs-Explained.png\" alt=\"ITM vs ATM vs OTM Options \u2013 Risk \u00a0Graphs Explained\" width=\"932\" height=\"644\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-vs-ATM-vs-OTM-Options-\u2013-Risk-Graphs-Explained.png 932w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-vs-ATM-vs-OTM-Options-\u2013-Risk-Graphs-Explained-300x207.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-vs-ATM-vs-OTM-Options-\u2013-Risk-Graphs-Explained-768x531.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-vs-ATM-vs-OTM-Options-\u2013-Risk-Graphs-Explained-50x35.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-vs-ATM-vs-OTM-Options-\u2013-Risk-Graphs-Explained-100x69.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-vs-ATM-vs-OTM-Options-\u2013-Risk-Graphs-Explained-150x104.png 150w\" sizes=\"(max-width: 932px) 100vw, 932px\" \/><\/p>\r\n<h3><b><\/b><strong><b>ITM Call Option<\/b><\/strong>:<\/h3>\r\n<ul>\r\n<li>The graph will start above zero on the left (showing intrinsic value).<\/li>\r\n<li>It rises steeply with increasing underlying price.<\/li>\r\n<li>The risk is capped by the premium paid (as the price can never go lower than zero).<\/li>\r\n<\/ul>\r\n<p><img decoding=\"async\" class=\"aligncenter wp-image-72552 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/2.1.png\" alt=\"ITM Call option Payoff\" width=\"789\" height=\"442\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/2.1.png 789w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/2.1-300x168.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/2.1-768x430.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/2.1-50x28.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/2.1-100x56.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/2.1-150x84.png 150w\" sizes=\"(max-width: 789px) 100vw, 789px\" \/><\/p>\r\n<p>Imagine you purchase an ITM (In-The-Money) call option with:<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Strike Price<\/b><\/strong>: \u20b9100<\/li>\r\n<li><b><\/b><strong><b>Premium Paid<\/b><\/strong>: \u20b910<\/li>\r\n<\/ul>\r\n<p>Here\u2019s how it plays out at different stock prices at expiry:<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>If the stock price is \u20b990<\/b><\/strong>, you incur a loss of \u20b910 (you can&#8217;t exercise the option, so you only lose the premium).<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9110<\/b><\/strong>, you break even. Your profit from the option is \u20b910 (\u20b9110 &#8211; \u20b9100), which offsets the \u20b910 premium paid.<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9150<\/b><\/strong>, you make a profit of \u20b940. Here\u2019s how: \u20b9150 (stock price) &#8211; \u20b9100 (strike price) &#8211; \u20b910 (premium paid) = \u20b940.<\/li>\r\n<\/ul>\r\n<p>This aligns with the graph&#8217;s key characteristics:<\/p>\r\n<ol>\r\n<li>The graph starts below zero to reflect the premium paid.<\/li>\r\n<li>It flattens until the stock price equals the strike price (no intrinsic value below this point).<\/li>\r\n<li>After crossing the strike price, it rises steeply, showing increasing profits as the stock price climbs.<\/li>\r\n<\/ol>\r\n<h3><b><\/b><strong><b>OTM Call Option<\/b><\/strong>:<\/h3>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72554 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM.png\" alt=\"OTM call option payoff\" width=\"789\" height=\"442\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM.png 789w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-300x168.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-768x430.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-50x28.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-100x56.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-150x84.png 150w\" sizes=\"(max-width: 789px) 100vw, 789px\" \/><\/p>\r\n<ul>\r\n<li>The graph starts at zero, and only increases as the underlying price exceeds the strike price.<\/li>\r\n<li>The risk of loss increases as the price doesn\u2019t move in favor of the option (as it can lose all the premium paid).<\/li>\r\n<\/ul>\r\n<p>Suppose you buy an OTM call option with:<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Strike Price<\/b><\/strong>: \u20b9150<\/li>\r\n<li><b><\/b><strong><b>Premium Paid<\/b><\/strong>: \u20b910<\/li>\r\n<\/ul>\r\n<p>Here\u2019s what happens at different stock prices on expiry:<\/p>\r\n<ol>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9140<\/b><\/strong>, the option expires worthless because the stock price is below the strike price. You lose the entire premium of \u20b910.<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9150<\/b><\/strong>, you still incur a loss of \u20b910 (your premium) because the option doesn\u2019t yield any intrinsic value (the strike price equals the stock price).<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9170<\/b><\/strong>, you make a profit of \u20b910: \u20b9170 (stock price) &#8211; \u20b9150 (strike price) &#8211; \u20b910 (premium paid) = \u20b910.<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9200<\/b><\/strong>, your profit jumps to \u20b940: \u20b9200 (stock price) &#8211; \u20b9150 (strike price) &#8211; \u20b910 (premium paid) = \u20b940.<\/li>\r\n<\/ol>\r\n<p><strong><b>How It Relates to the Graph:<\/b><\/strong><\/p>\r\n<ul>\r\n<li>The graph starts at zero (at strike price \u20b9150) and rises steeply as the stock price exceeds the strike price, showing growing profits.<\/li>\r\n<li>The risk is limited to the premium paid (\u20b910), as the graph never dips below zero.<\/li>\r\n<\/ul>\r\n<h3><b><\/b><strong><b>ATM Call Option<\/b><\/strong>:<\/h3>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72555 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ATM.png\" alt=\"ATM call option payoff\" width=\"789\" height=\"442\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ATM.png 789w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ATM-300x168.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ATM-768x430.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ATM-50x28.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ATM-100x56.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ATM-150x84.png 150w\" sizes=\"(max-width: 789px) 100vw, 789px\" \/><\/p>\r\n<ul>\r\n<li>The graph starts at zero (no intrinsic value).<\/li>\r\n<li>It slopes upward as the underlying price moves higher, but also has time decay working against it (the value decreases over time).<\/li>\r\n<\/ul>\r\n<p>Let\u2019s look at an example of an <strong><b>At-The-Money (ATM) Call Option<\/b><\/strong>\u00a0to explain this graph.<\/p>\r\n<p>Suppose:<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Strike Price<\/b><\/strong>: \u20b9100<\/li>\r\n<li><b><\/b><strong><b>Premium Paid<\/b><\/strong>: \u20b910<\/li>\r\n<\/ul>\r\n<p><strong><b>Scenario on Expiry:<\/b><\/strong><\/p>\r\n<ol>\r\n<li><b><\/b><strong><b>If the stock price is \u20b990<\/b><\/strong>, the option expires worthless as it&#8217;s below the strike price. Your loss equals the premium paid (\u20b910).<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9100<\/b><\/strong>, the option is still worthless since the stock price equals the strike price. Loss = \u20b910 (premium paid).<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9120<\/b><\/strong>, the option becomes profitable: \u20b9120 (stock price) &#8211; \u20b9100 (strike price) &#8211; \u20b910 (premium paid) = \u20b910 profit.<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9150<\/b><\/strong>, your profit increases further: \u20b9150 (stock price) &#8211; \u20b9100 (strike price) &#8211; \u20b910 (premium paid) = \u20b940 profit.<\/li>\r\n<\/ol>\r\n<p><strong><b>Time Decay (Theta Effect):<\/b><\/strong><\/p>\r\n<p>If the current stock price is near \u20b9100 (strike price) before expiry, the call option has time value. For example, even if the stock price is \u20b9100, the option might be worth \u20b95 due to the potential for future movement. However, as the expiration date approaches, the time value erodes, causing the option&#8217;s value to decrease unless the stock price moves significantly higher. This is called time decay.<\/p>\r\n<h4><strong><b>How It Matches the Graph:<\/b><\/strong><\/h4>\r\n<ul>\r\n<li>The graph starts at zero (no intrinsic value at the strike price of \u20b9100).<\/li>\r\n<li>It slopes upward as the stock price rises, showing increasing profit.<\/li>\r\n<li><b><\/b><strong><b>Time decay<\/b><\/strong>works against the option\u2019s value, especially when the stock price is close to the strike price.<\/li>\r\n<\/ul>\r\n<h3><b><\/b><strong><b>ITM Put Option<\/b><\/strong>:<\/h3>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72556 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-PUT-Options.png\" alt=\"ITM PUT Options\" width=\"789\" height=\"442\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-PUT-Options.png 789w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-PUT-Options-300x168.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-PUT-Options-768x430.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-PUT-Options-50x28.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-PUT-Options-100x56.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-PUT-Options-150x84.png 150w\" sizes=\"(max-width: 789px) 100vw, 789px\" \/><\/p>\r\n<ul>\r\n<li>The graph starts above zero, showing intrinsic value as the underlying price is lower than the strike price.<\/li>\r\n<li>The value increases with a falling underlying price.<\/li>\r\n<\/ul>\r\n<p>Imagine you hold an ITM put option with a strike price of \u20b9100. This means you have the right to sell the underlying asset at \u20b9100, regardless of its market price. Now, consider the following scenarios:<\/p>\r\n<ol>\r\n<li><b><\/b><strong><b>Stock price at expiry: \u20b980<\/b><\/strong>You can sell the asset for \u20b9100 even though it&#8217;s only worth \u20b980 in the market, making a profit of \u20b920 per unit.<\/li>\r\n<li><b><\/b><strong><b>Stock price at expiry: \u20b960<\/b><\/strong>Selling at \u20b9100 while the market price is \u20b960 results in a profit of \u20b940 per unit. As the underlying price drops further, your profit continues to increase.<\/li>\r\n<li><b><\/b><strong><b>Stock price at expiry: \u20b9120<\/b><\/strong>Here, the asset is worth more in the market than the strike price. Therefore, you wouldn\u2019t exercise your option, resulting in a small loss\u2014approximately \u20b910 in this case.<\/li>\r\n<\/ol>\r\n<p>This payoff structure illustrates how the graph starts above zero (representing intrinsic value) and increases as the underlying price falls below the strike price<\/p>\r\n<h3><b><\/b><strong><b>O<\/b><\/strong><strong><b>TM Put Option<\/b><\/strong>:<\/h3>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72557 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-put-Options.png\" alt=\"OTM put Options\" width=\"789\" height=\"442\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-put-Options.png 789w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-put-Options-300x168.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-put-Options-768x430.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-put-Options-50x28.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-put-Options-100x56.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-put-Options-150x84.png 150w\" sizes=\"(max-width: 789px) 100vw, 789px\" \/><\/p>\r\n<ul>\r\n<li>The graph starts at zero and increases as the underlying price falls.<\/li>\r\n<li>The risk of loss increases as the underlying price doesn\u2019t fall below the strike price.<\/li>\r\n<\/ul>\r\n<p>\u20b9100 (strike price) &#8211; \u20b970 (stock price) &#8211; \u20b910 (premium paid) = \u20b920 profit per un<\/p>\r\n<p>An OTM put option payoff graph represents the outcome when the underlying price stays above the strike price initially, and profits rise as the price falls below the strike price. Here&#8217;s an example:<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Strike Price:<\/b><\/strong>\u20b9100<\/li>\r\n<li><b><\/b><strong><b>Put Option Premium:<\/b><\/strong>\u20b910<\/li>\r\n<\/ul>\r\n<p><b><\/b><strong><b>Scenario 1: <\/b><\/strong>Stock Price at Expiry = \u20b970 You have the right to sell the stock at \u20b9100, while it&#8217;s worth \u20b970 in the market. Your profit:<\/p>\r\n<p><strong><b>Scenario 2:<\/b><\/strong>\u00a0Stock Price at Expiry = \u20b990<\/p>\r\n<ul>\r\n<li>\u20b9100 &#8211; \u20b990 &#8211; \u20b910 = \u20b90. The premium paid matches the intrinsic value, resulting in no profit.<\/li>\r\n<\/ul>\r\n<p><strong><b>Scenario 3:<\/b><\/strong>\u00a0Stock Price at Expiry = \u20b9110 Here, the stock is worth more in the market than your strike price. You don&#8217;t exercise the option. Your loss is capped at \u20b910 (the premium paid).<\/p>\r\n<p>This aligns with the graph\u2014profit rises when prices fall below \u20b9100, and the loss (premium) stays fixed when prices stay above \u20b9100.<\/p>\r\n<h3><b><\/b><strong><b>ATM Put Option<\/b><\/strong>:<\/h3>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72558 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/atm-put-1.png\" alt=\"Atm put options\" width=\"789\" height=\"442\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/atm-put-1.png 789w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/atm-put-1-300x168.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/atm-put-1-768x430.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/atm-put-1-50x28.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/atm-put-1-100x56.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/atm-put-1-150x84.png 150w\" sizes=\"(max-width: 789px) 100vw, 789px\" \/><\/p>\r\n<ul>\r\n<li>The graph starts at zero (no intrinsic value).<\/li>\r\n<li>It increases as the underlying price moves lower, with similar time decay effects.<\/li>\r\n<\/ul>\r\n<p>Example of ATM (At-the-Money) Put Option, where the strike price is \u20b9100 and the premium paid for the option is \u20b910:<\/p>\r\n<p><strong><b>Examples:<\/b><\/strong><\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Stock price at expiry: \u20b980<\/b><\/strong>You exercise the put option to sell at \u20b9100 while the stock is worth \u20b980 in the market.<\/li>\r\n<li><strong><b>Payoff calculation:<\/b><\/strong> \u20b9100 (strike price) &#8211; \u20b980 (stock price) = \u20b920 After deductng the premium: \u20b920 &#8211; \u20b910 = \u20b910 profit.<\/li>\r\n<li><b><\/b><strong><b>Stock price at expiry: \u20b9100<\/b><\/strong>Since the stock price is equal to the strike price, there&#8217;s no intrinsic value.<\/li>\r\n<li><strong><b>Payoff calculation:<\/b><\/strong>\u00a0\u20b9100 &#8211; \u20b9100 = \u20b90 After deducting the premium: \u20b90 &#8211; \u20b910 = \u20b910 loss.<\/li>\r\n<\/ul>\r\n<p><b><\/b><strong><b>Stock price at expiry: \u20b9120<\/b><\/strong><\/p>\r\n<p>The stock price is higher than the strike price, so the option is not exercised, resulting in a loss.\u00a0Payoff calculation:\u00a0\u20b90 &#8211; \u20b910 = \u20b910 loss.<\/p>\r\n<p>This aligns with the graph: the payoff starts at zero when the stock price equals the strike price (\u20b9100). As the stock price falls below \u20b9100, the payoff rises, offsetting the premium paid. Losses, however, are capped at the premium when the stock price stays above the strike price.<\/p>\r\n<h3><strong><b>Summary of Risk Profiles:<\/b><\/strong><\/h3>\r\n<ul>\r\n<li><b><\/b><strong><b>ITM Options<\/b><\/strong>: Lower risk, as there is intrinsic value. Profit increases with favorable movement in the underlying.<\/li>\r\n<li><b><\/b><strong><b>OTM Options<\/b><\/strong>: Higher risk, as they have no intrinsic value and are entirely dependent on the price moving significantly in the favorable direction.<\/li>\r\n<li><b><\/b><strong><b>ATM Options<\/b><\/strong>: Moderate risk, as they are dependent on the underlying price moving significantly and are subject to time decay.<\/li>\r\n<\/ul><\/div>\n<div id='text_slider_slide03' class='sa_hover_container' data-hash='Option-Seller-Risk-Profile\u2013Short-Calls-and-Puts' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; '><h2><strong><b>2.3 Option Seller Risk Profile \u2013 Short Calls \u00a0and Puts<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72946 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Seller-Risk-Profile-\u2013-Short-Calls-and-Puts.png\" alt=\"Option Seller Risk Profile \u2013 Short Calls \u00a0and Puts\" width=\"882\" height=\"667\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Seller-Risk-Profile-\u2013-Short-Calls-and-Puts.png 882w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Seller-Risk-Profile-\u2013-Short-Calls-and-Puts-300x227.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Seller-Risk-Profile-\u2013-Short-Calls-and-Puts-768x581.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Seller-Risk-Profile-\u2013-Short-Calls-and-Puts-50x38.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Seller-Risk-Profile-\u2013-Short-Calls-and-Puts-100x76.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Seller-Risk-Profile-\u2013-Short-Calls-and-Puts-150x113.png 150w\" sizes=\"(max-width: 882px) 100vw, 882px\" \/><\/p>\r\n<table style=\"height: 282px\" width=\"1218\">\r\n<tbody>\r\n<tr>\r\n<td width=\"272\">\r\n<p><strong><b>Option Type<\/b><\/strong><\/p>\r\n<\/td>\r\n<td width=\"234\">\r\n<p><strong><b>\u00a0Max Profit<\/b><\/strong><\/p>\r\n<\/td>\r\n<td width=\"218\">\r\n<p><strong><b>\u00a0Max Loss<\/b><\/strong><\/p>\r\n<\/td>\r\n<td width=\"339\">\r\n<p><strong><b>Ideal Market<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Buy Call \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/p>\r\n<\/td>\r\n<td>\r\n<p>Unlimited<\/p>\r\n<\/td>\r\n<td>\r\n<p>Premium<\/p>\r\n<\/td>\r\n<td>\r\n<p>Bullish<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Sell Call<\/p>\r\n<\/td>\r\n<td>\r\n<p>Premium<\/p>\r\n<\/td>\r\n<td>\r\n<p>Unlimited<\/p>\r\n<\/td>\r\n<td>\r\n<p>Bearish\/Neutral<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Buy Put<\/p>\r\n<\/td>\r\n<td>\r\n<p>High (if price drops)<\/p>\r\n<\/td>\r\n<td>\r\n<p>Premium<\/p>\r\n<\/td>\r\n<td>\r\n<p>Bearish<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Sell \u00a0Put<\/p>\r\n<\/td>\r\n<td>\r\n<p>Premium<\/p>\r\n<\/td>\r\n<td>\r\n<p>High (if price falls)<\/p>\r\n<\/td>\r\n<td>\r\n<p>Bullish\/ Neutral<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p>&nbsp;<\/p>\r\n<h2><strong><b>1. <\/b><\/strong><strong><b>Selling a Call Option (Short Call)<\/b><\/strong><\/h2>\r\n<p><strong><b>Maximum Profit:<\/b><\/strong>\u00a0Limited to the premium received.<br \/><strong><b>Maximum Loss:<\/b><\/strong>\u00a0Unlimited (if the stock price rises significantly).<br \/><strong><b>Break-even Point:<\/b><\/strong>\u00a0Strike Price + Premium Received.<\/p>\r\n<h3><strong><b>Risk Analysis<\/b><\/strong><\/h3>\r\n<ul>\r\n<li>The seller of a call option is obligated to sell the asset at the strike price if the buyer exercises the option.<\/li>\r\n<li>If the stock price stays belowthe strike price, the option expires worthless, and the seller keeps the premium as profit.<\/li>\r\n<li>If the stock price rises abovethe strike price, the seller must buy the stock at the market price and sell it at the strike price, leading to unlimited losses\u00a0as the stock price can theoretically rise indefinitely.<\/li>\r\n<li>This strategy is very risky, especially if the stock price moves sharply upwards.<\/li>\r\n<\/ul>\r\n<h3><strong><b>Example of Short Call Risk<\/b><\/strong><\/h3>\r\n<ul>\r\n<li>Strike Price: \u20b9100<\/li>\r\n<li>Premium Received: \u20b95<\/li>\r\n<li>If the stock closes at \u20b995, the option expires worthless, and the seller keeps the \u20b95 premium.<\/li>\r\n<li>If the stock closes at \u20b9120, the seller has to sell at \u20b9100 but buy at \u20b9120, leading to a loss of \u20b915 per share (\u20b920 loss &#8211; \u20b95 premium).<\/li>\r\n<li>If the stock jumps to \u20b9200, the seller faces a massive loss of \u20b995 per share.<\/li>\r\n<\/ul>\r\n<h3><strong><b>Who Uses This Strategy?<\/b><\/strong><\/h3>\r\n<ul>\r\n<li>Traders who believe that the stock price won&#8217;t rise significantly.<\/li>\r\n<li>Investors who own the stock and write covered calls to generate extra income (covered call strategy).<\/li>\r\n<\/ul>\r\n<h2><strong><b>2. Selling a Put Option (Short Put)<\/b><\/strong><\/h2>\r\n<p><strong><b>Maximum Profit:<\/b><\/strong>\u00a0Limited to the premium received.<\/p>\r\n<p><strong><b>Maximum Loss:<\/b><\/strong>\u00a0Significant but <strong><b>limited<\/b><\/strong>\u00a0(if the stock price falls to zero).<br \/><strong><b>Break-even Point:<\/b><\/strong>\u00a0Strike Price &#8211; Premium Received.<\/p>\r\n<h3><strong><b>Risk Analysis<\/b><\/strong><\/h3>\r\n<ul>\r\n<li>The seller of a put option is obligated to buythe asset at the strike price if the buyer exercises the option.<\/li>\r\n<li>If the stock price stays abovethe strike price, the option expires worthless, and the seller keeps the premium as profit.<\/li>\r\n<li>If the stock price drops significantly, the seller must buy the stock at the strike price, which can lead to substantial lossesif the stock collapses.<\/li>\r\n<li>The maximum loss occurs when the stock price falls to zero, meaning the seller must buy a worthless stock at the strike price.<\/li>\r\n<\/ul>\r\n<h3><strong><b>Example of Short Put Risk<\/b><\/strong><\/h3>\r\n<ul>\r\n<li>Strike Price: \u20b9100<\/li>\r\n<li>Premium Received: \u20b95<\/li>\r\n<li>If the stock closes at \u20b9105, the option expires worthless, and the seller keeps the \u20b95 premium.<\/li>\r\n<li>If the stock closes at \u20b980, the seller must buy at \u20b9100, leading to a loss of \u20b915 per share (\u20b920 loss &#8211; \u20b95 premium).<\/li>\r\n<li>If the stock drops to \u20b920, the seller faces a loss of \u20b975 per share.<\/li>\r\n<li>If the company goes bankrupt (\u20b90 stock price), the seller suffers a maximum loss of \u20b995 per share.<\/li>\r\n<\/ul>\r\n<h3><strong><b>Who Uses This Strategy?<\/b><\/strong><\/h3>\r\n<ul>\r\n<li>Traders who believe that the stock price won\u2019t fall significantly.<\/li>\r\n<li>Investors who want to buy a stock at a lower price(cash-secured put strategy).<\/li>\r\n<\/ul>\r\n<h2><strong><b>Key Takeaways<\/b><\/strong><\/h2>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td>\r\n<p><strong><b>Option Type<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Maximum Profit<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Maximum Loss<\/b><\/strong><\/p>\r\n<\/td>\r\n<td width=\"515\">\r\n<p><strong><b>Ideal Market Condition<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Short Call<\/p>\r\n<\/td>\r\n<td>\r\n<p>Limited to premium<\/p>\r\n<\/td>\r\n<td>\r\n<p>Unlimited<\/p>\r\n<\/td>\r\n<td width=\"515\">\r\n<p>Bearish or Neutral<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Short Put<\/p>\r\n<\/td>\r\n<td>\r\n<p>Limited to premium<\/p>\r\n<\/td>\r\n<td>\r\n<p>Significant (Stock Price \u2192 0)<\/p>\r\n<\/td>\r\n<td width=\"515\">\r\n<p>Bullish or Neutral<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p><strong><b>\u00a0<\/b><\/strong><\/p>\r\n<p><strong><b>\u00a0<\/b><\/strong><\/p>\r\n<p><strong><b>\u00a0<\/b><\/strong><\/p>\r\n<p><strong><b>\u00a0<\/b><\/strong><\/p><\/div>\n<div id='text_slider_slide04' class='sa_hover_container' data-hash='Real-Life-Example-of-Buying-a-Put-Option-for-Hedging' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; '><h2><strong><b>2.4 <\/b><\/strong><strong><b>Real-Life Example of Buying a Put Option \u00a0for Hedging<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72947 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Real-Life-Example-of-Buying-a-Put-Option-for-Hedging.png\" alt=\"Real-Life Example of Buying a Put Option \u00a0for Hedging\" width=\"894\" height=\"658\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Real-Life-Example-of-Buying-a-Put-Option-for-Hedging.png 894w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Real-Life-Example-of-Buying-a-Put-Option-for-Hedging-300x221.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Real-Life-Example-of-Buying-a-Put-Option-for-Hedging-768x565.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Real-Life-Example-of-Buying-a-Put-Option-for-Hedging-50x37.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Real-Life-Example-of-Buying-a-Put-Option-for-Hedging-100x74.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Real-Life-Example-of-Buying-a-Put-Option-for-Hedging-150x110.png 150w\" sizes=\"(max-width: 894px) 100vw, 894px\" \/><\/p>\r\n<p>&nbsp;<\/p>\r\n<h2><strong><b> <img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72559 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ravi-put-option.png\" alt=\"ravi put option\" width=\"789\" height=\"479\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ravi-put-option.png 789w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ravi-put-option-300x182.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ravi-put-option-768x466.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ravi-put-option-50x30.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ravi-put-option-100x61.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ravi-put-option-150x91.png 150w\" sizes=\"(max-width: 789px) 100vw, 789px\" \/><\/b><\/strong><\/h2>\r\n<p><strong><b>\u00a0<\/b><\/strong><\/p>\r\n<p>Imagine Ravi is\u00a0an investor holding shares of Reliance Industries, currently trading at \u20b92,500 per share. Ravi is concerned about a potential drop in the stock price due to market volatility. To protect his investment, he\u00a0decided\u00a0to buy a put option with a strike price of \u20b92,400, expiring in one month. The premium for this option is \u20b950 per share.<\/p>\r\n<p><strong><b>Scenario 1: Stock price falls below \u20b92,400<\/b><\/strong>\u00a0If the stock price drops to \u20b92,300 before the option expires, Ravi\u00a0can exercise the put option and sell shares at \u20b92,400 instead of the lower market price of \u20b92,300. This minimizes his losses, as he\u00a0effectively locked in a selling price of \u20b92,400. After accounting for the \u20b950 premium, his \u00a0net selling price is \u20b92,350, which is still better than \u20b92,300.<\/p>\r\n<p><strong><b>Scenario 2: Stock price stays above \u20b92,400<\/b><\/strong>\u00a0If the stock price remains above \u20b92,400 (e.g., \u20b92,600), Ravi\u00a0wouldn&#8217;t exercise the put option, as he\u00a0can sell shares at the higher market price. In this case, the put option expires worthless, and his only loss is the \u20b950 premium he\u00a0paid.<\/p>\r\n<p>This example demonstrates how put options can act as a safety net for investors, helping them manage risks in a volatile market.<\/p><\/div>\n<div id='text_slider_slide05' class='sa_hover_container' data-hash='Put-Options-quotes-and-screens-on-a-Trading-platform' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; '><h2><strong><b>2.5 <\/b><\/strong><strong><b>Put Options quotes and screens on a Trading platform<\/b><\/strong><\/h2>\r\n<p>&nbsp;<\/p>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72948 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Understanding-Put-Options-Definition-Use-Cases-Profit-Scenarios-1.png\" alt=\"Understanding Put Options Definition, Use Cases, Profit Scenarios\" width=\"796\" height=\"864\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Understanding-Put-Options-Definition-Use-Cases-Profit-Scenarios-1.png 796w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Understanding-Put-Options-Definition-Use-Cases-Profit-Scenarios-1-276x300.png 276w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Understanding-Put-Options-Definition-Use-Cases-Profit-Scenarios-1-768x834.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Understanding-Put-Options-Definition-Use-Cases-Profit-Scenarios-1-46x50.png 46w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Understanding-Put-Options-Definition-Use-Cases-Profit-Scenarios-1-92x100.png 92w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Understanding-Put-Options-Definition-Use-Cases-Profit-Scenarios-1-150x163.png 150w\" sizes=\"(max-width: 796px) 100vw, 796px\" \/><\/p>\r\n<p>&nbsp;<\/p>\r\n<p>Put options quotes and screens are typically displayed on trading platforms through an options chain. This chain provides detailed information about various strike prices, expiration dates, and premiums for both call and put options.<\/p>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72560 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/SCREENSHOT.png\" alt=\"Option Chain Screenshot\" width=\"396\" height=\"449\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/SCREENSHOT.png 396w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/SCREENSHOT-265x300.png 265w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/SCREENSHOT-44x50.png 44w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/SCREENSHOT-88x100.png 88w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/SCREENSHOT-150x170.png 150w\" sizes=\"(max-width: 396px) 100vw, 396px\" \/><\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Options Chain<\/b><\/strong>: The chain shows strike prices in the middle column, with bid and ask prices for calls and puts on either side. You can select specific strike prices to view detailed quotes.<\/li>\r\n<\/ul>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72561 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Untitled-4.png\" alt=\"Options Chain\" width=\"720\" height=\"320\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Untitled-4.png 720w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Untitled-4-300x133.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Untitled-4-50x22.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Untitled-4-100x44.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Untitled-4-150x67.png 150w\" sizes=\"(max-width: 720px) 100vw, 720px\" \/><\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Expiry Dates<\/b><\/strong>: Platforms allow you to toggle between different expiration dates, such as near-term or long-term options.<\/li>\r\n<li><b><\/b><strong><b>Market Data<\/b><\/strong>: Real-time streaming quotes for the underlying asset and options are available if you subscribe to market data add-ons.<\/li>\r\n<li><b><\/b><strong><b>Customizable Screens<\/b><\/strong>: Many platforms let you add or remove data columns, set up alerts, and group positions for better analysis<\/li>\r\n<\/ul><\/div>\n<div id='text_slider_slide06' class='sa_hover_container' data-hash='Option-Chain-Parameters-for-Put-Options' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; '><h2><strong><b>2.6 <\/b><\/strong><strong><b>Option Chain Parameters for Put Options<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72949 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Chain-Parameters-for-Put-Options.png\" alt=\"Option Chain Parameters for Put Options\" width=\"948\" height=\"809\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Chain-Parameters-for-Put-Options.png 948w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Chain-Parameters-for-Put-Options-300x256.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Chain-Parameters-for-Put-Options-768x655.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Chain-Parameters-for-Put-Options-50x43.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Chain-Parameters-for-Put-Options-100x85.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Chain-Parameters-for-Put-Options-150x128.png 150w\" sizes=\"(max-width: 948px) 100vw, 948px\" \/><\/p>\r\n<h3>1. <strong><b>Strike Price<\/b><\/strong><\/h3>\r\n<p>The strike price is the predetermined price at which the holder of a put option can sell the underlying asset. It forms the backbone of the option chain. For instance, in the option chain for Reliance Industries, strike prices might range from \u20b92,300 to \u20b92,700 in intervals (e.g., \u20b92,300, \u20b92,350, \u20b92,400, and so on). Each strike price has unique associated data like premium, open interest, etc.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If Reliance Industries is trading at \u20b92,500, you might choose a strike price of \u20b92,400 to hedge against a possible price drop.<\/p>\r\n<h3>2. <strong><b>Premium (Last Traded Price &#8211; LTP)<\/b><\/strong><\/h3>\r\n<p>The premium is the cost of purchasing the put option, calculated per share. It reflects the current value of the option based on factors like market sentiment, time to expiration, and implied volatility.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If the premium for a \u20b92,400 strike price put option is \u20b950, you would pay \u20b950 per share to secure the right to sell at \u20b92,400.<\/p>\r\n<h3>3. <strong><b>Open Interest (OI)<\/b><\/strong><\/h3>\r\n<p>Open interest is the total number of contracts that are currently active for a particular strike price. It indicates market activity and liquidity for that option.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If there are 5,000 contracts with the \u20b92,400 strike price, this is the open interest. Higher open interest suggests significant market interest in this option.<\/p>\r\n<h3>4. <strong><b>Change in Open Interest <\/b><\/strong><\/h3>\r\n<p>This shows the difference in open interest from the previous trading session. A positive change indicates more contracts have been opened, signaling increased market activity.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If the open interest for the \u20b92,400 strike price put option increases from 5,000 to 5,500, the change in open interest is +500 contracts.<\/p>\r\n<h3>5. <strong><b>Volume<\/b><\/strong><\/h3>\r\n<p>Volume is the number of option contracts traded during the current trading session. Higher volume can indicate active trading and greater interest in that strike price.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If 2,000 contracts of the \u20b92,400 strike price put option were traded today, that\u2019s the volume.<\/p>\r\n<h3>6. <strong><b>Implied Volatility (IV)<\/b><\/strong><\/h3>\r\n<p>Implied volatility measures the market\u2019s expectation of future price fluctuations for the underlying asset. Options with higher IVs tend to have higher premiums.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If the IV of a \u20b92,400 strike price put option is 30%, this indicates higher market uncertainty and results in a higher premium compared to an option with lower IV.<\/p>\r\n<h3>7. <strong><b>Bid Price and Ask Price<\/b><\/strong><\/h3>\r\n<p>These represent the price range at which buyers and sellers are willing to transact. The bid price is the highest price a buyer is willing to pay, while the ask price is the lowest price a seller is willing to accept.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0For a \u20b92,400 strike price put option:<\/p>\r\n<ul>\r\n<li>Bid price: \u20b948<\/li>\r\n<li>Ask price: \u20b952<\/li>\r\n<\/ul>\r\n<p>This means buyers are ready to pay \u20b948, while sellers want \u20b952.<\/p>\r\n<h3>8. <strong><b>Net Change<\/b><\/strong><\/h3>\r\n<p>This reflects the change in the option\u2019s premium compared to the previous day\u2019s closing price.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If the premium for the \u20b92,400 strike price put option increased from \u20b950 to \u20b955 today, the net change is +\u20b95.<\/p>\r\n<h3>9. <strong><b>ITM, ATM, and OTM (Intrinsic Value)<\/b><\/strong><\/h3>\r\n<p>These terms classify options based on the relationship between the strike price and the current price of the underlying asset:<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>In-the-Money (ITM)<\/b><\/strong>: Strike price is below the current market price of the underlying asset. The put option has intrinsic value.<\/li>\r\n<li><b><\/b><strong><b>At-the-Money (ATM)<\/b><\/strong>: Strike price is equal to the current market price. The option has no intrinsic value, but time value remains.<\/li>\r\n<li><b><\/b><strong><b>Out-of-the-Money (OTM)<\/b><\/strong>: Strike price is above the current market price. The option has no intrinsic value.<\/li>\r\n<\/ul>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If Reliance Industries is trading at \u20b92,500:<\/p>\r\n<ul>\r\n<li>\u20b92,400 strike price: <strong><b>ITM<\/b><\/strong><\/li>\r\n<li>\u20b92,500 strike price: <strong><b>ATM<\/b><\/strong><\/li>\r\n<li>\u20b92,600 strike price: <strong><b>OTM<\/b><\/strong><\/li>\r\n<\/ul><\/div>\n<div id='text_slider_slide07' class='sa_hover_container' data-hash='Using-Put-Options-spreads-to-limit-risk' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; '><h2><strong><b>2.7 Using Put Options spreads to limit risk<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72950 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Using-Put-Options-spreads-to-limit-risk.png\" alt=\"Using Put Options spreads to limit risk\" width=\"657\" height=\"657\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Using-Put-Options-spreads-to-limit-risk.png 657w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Using-Put-Options-spreads-to-limit-risk-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Using-Put-Options-spreads-to-limit-risk-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Using-Put-Options-spreads-to-limit-risk-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Using-Put-Options-spreads-to-limit-risk-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Using-Put-Options-spreads-to-limit-risk-96x96.png 96w\" sizes=\"(max-width: 657px) 100vw, 657px\" \/><\/p>\r\n<p>Put option spreads are a strategic way to limit risk while managing costs in options trading. Here are some common types of put spreads and how they work:<\/p>\r\n<h3><strong><b>1. <\/b><\/strong><strong><b>Bear Put Spread<\/b><\/strong><\/h3>\r\n<ul>\r\n<li><b><\/b><strong><b>How it works<\/b><\/strong><strong><b>:<\/b><\/strong>This strategy involves buying a put option at a higher strike price and selling another put option at a lower strike price on the same underlying asset and expiration date.<\/li>\r\n<li><b><\/b><strong><b>Purpose<\/b><\/strong><strong><b>: <\/b><\/strong>It limits potential losses while reducing the cost of the trade.<\/li>\r\n<li><b><\/b><strong><b>Example<\/b><\/strong><strong><b>:<\/b><\/strong>Suppose a stock is trading at \u20b91,000. You buy a put option with a strike price of \u20b91,050 (premium \u20b950) and sell a put option with a strike price of \u20b9950 (premium \u20b920). Your net cost is \u20b930, and your maximum profit is \u20b970 if the stock price falls below \u20b9950.<\/li>\r\n<\/ul>\r\n<h3><strong><b>2. <\/b><\/strong><strong><b>Bull Put Spread<\/b><\/strong><\/h3>\r\n<ul>\r\n<li><b><\/b><strong><b>How it works<\/b><\/strong><strong><b>:<\/b><\/strong>This strategy involves selling a put option at a higher strike price and buying another put option at a lower strike price.<\/li>\r\n<li><b><\/b><strong><b>Purpose<\/b><\/strong><strong><b>: <\/b><\/strong>It generates income while limiting downside risk.<\/li>\r\n<li><b><\/b><strong><b>Example<\/b><\/strong><strong><b>: <\/b><\/strong>Suppose a stock is trading at \u20b91,000. You sell a put option with a strike price of \u20b9950 (premium \u20b920) and buy a put option with a strike price of \u20b9900 (premium \u20b910). Your net credit is \u20b910, and your maximum loss is \u20b940 if the stock price falls below \u20b9900.<\/li>\r\n<\/ul>\r\n<h3><strong><b>3. <\/b><\/strong><strong><b>Protective Put Spread<\/b><\/strong><\/h3>\r\n<ul>\r\n<li><b><\/b><strong><b>How it works<\/b><\/strong><strong><b>:<\/b><\/strong>This strategy involves buying a put option to protect an existing stock position and selling another put option at a lower strike price to offset the cost.<\/li>\r\n<li><b><\/b><strong><b>Purpose<\/b><\/strong><strong><b>: <\/b><\/strong>It provides downside protection while reducing the cost of the hedge.<\/li>\r\n<li><b><\/b><strong><b>Example<\/b><\/strong><strong><b>:<\/b><\/strong>If you own shares of a stock trading at \u20b91,000, you buy a put option with a strike price of \u20b9950 (premium \u20b950) and sell a put option with a strike price of \u20b9900 (premium \u20b920). Your net cost is \u20b930, and you\u2019re protected against losses below \u20b9950.<\/li>\r\n<\/ul><\/div>\n<\/div>\n<\/div>\n<script type='text\/javascript'>\n\tjQuery(document).ready(function() {\n\t\tjQuery('#text_slider').owlCarousel({\n\t\t\titems : 1,\n\t\t\tsmartSpeed : 400,\n\t\t\tautoplay : false,\n\t\t\tautoplayHoverPause : false,\n\t\t\tsmartSpeed : 400,\n\t\t\tfluidSpeed : 400,\n\t\t\tautoplaySpeed : 400,\n\t\t\tnavSpeed : 400,\n\t\t\tdotsSpeed : 400,\n\t\t\tdotsEach : 1,\n\t\t\tloop : false,\n\t\t\tnav : true,\n\t\t\tnavText : ['Previous','Next'],\n\t\t\tdots : true,\n\t\t\tresponsiveRefreshRate : 200,\n\t\t\tslideBy : 1,\n\t\t\tmergeFit : true,\n\t\t\tautoHeight : true,\n\t\t\tmouseDrag : false,\n\t\t\ttouchDrag : true\n\t\t});\n\t\tjQuery('#text_slider').css('visibility', 'visible');\n\t\tvar owl_goto = jQuery('#text_slider');\n\t\tjQuery('.text_slider_goto1').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 0);\n\t\t});\n\t\tjQuery('.text_slider_goto2').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 1);\n\t\t});\n\t\tjQuery('.text_slider_goto3').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 2);\n\t\t});\n\t\tjQuery('.text_slider_goto4').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 3);\n\t\t});\n\t\tjQuery('.text_slider_goto5').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 4);\n\t\t});\n\t\tjQuery('.text_slider_goto6').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 5);\n\t\t});\n\t\tjQuery('.text_slider_goto7').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 6);\n\t\t});\n\t\tvar resize_72543 = jQuery('.owl-carousel');\n\t\tresize_72543.on('initialized.owl.carousel', function(e) {\n\t\t\tif (typeof(Event) === 'function') {\n\t\t\t\twindow.dispatchEvent(new Event('resize'));\n\t\t\t} else {\n\t\t\t\tvar evt = window.document.createEvent('UIEvents');\n\t\t\t\tevt.initUIEvent('resize', true, false, window, 0);\n\t\t\t\twindow.dispatchEvent(evt);\n\t\t\t}\n\t\t});\n\t});\n<\/script>\n<\/p>                    <\/div>\n\t\t        \n                    <div id=\"slides-tab\" class=\"clearfix eael-tab-content-item \" data-title-link=\"slides-tab\">\n\t\t\t\t        <p><div class='white' style='background:rgb(255, 255, 255); border:solid 0px rgb(255, 255, 255); border-radius:0px; padding:0px 0px 0px 1px;'>\n<div id='text_slider' class='owl-carousel sa_owl_theme owl-pagination-true' data-slider-id='text_slider' style='visibility: visible;visibility:visible;'>\n<div id='text_slider_slide01' class='sa_hover_container' data-hash='What-Are-ITM-ATM-and-OTM-Options ' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; '><h2>2.1 <strong><b>What Are ITM, ATM, and OTM Options?\u00a0<\/b><\/strong><\/h2>\r\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"aligncenter wp-image-72944 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/What-are-Options-Greek.png\" alt=\"What Are ITM, ATM, and OTM Options? Definitions and Examples\" width=\"885\" height=\"685\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/What-are-Options-Greek.png 885w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/What-are-Options-Greek-300x232.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/What-are-Options-Greek-768x594.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/What-are-Options-Greek-50x39.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/What-are-Options-Greek-100x77.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/What-are-Options-Greek-150x116.png 150w\" sizes=\"(max-width: 885px) 100vw, 885px\" \/><\/p>\r\n<h3><strong><b>In the Money (ITM):<\/b><\/strong><\/h3>\r\n<ul>\r\n<li><b><\/b><strong><b>Call Option:<\/b><\/strong>A call option is &#8220;in the money&#8221; when the strike price is below\u00a0the current market price of the underlying asset. This means exercising the option would allow the buyer to purchase the asset at a lower price than its current market value.<\/li>\r\n<li><b><\/b><strong><b>Put Option:<\/b><\/strong>A put option is &#8220;in the money&#8221; when the strike price is above\u00a0the current market price of the underlying asset. This means exercising the option would allow the buyer to sell the asset at a higher price than its current market value.<\/li>\r\n<\/ul>\r\n<h3><strong><b>At the Money (ATM):<\/b><\/strong><\/h3>\r\n<p>An option is considered &#8220;at the money&#8221; when the strike price is equal to or very close to\u00a0the current market price of the underlying asset. In this case, exercising the option results in no intrinsic profit.<\/p>\r\n<h3><strong><b>Out of the Money (OTM):<\/b><\/strong><\/h3>\r\n<ul>\r\n<li><b><\/b><strong><b>Call Option:<\/b><\/strong>A call option is &#8220;out of the money&#8221; when the strike price is above\u00a0the current market price of the underlying asset. Exercising it would mean buying the asset at a price higher than its market value, which isn&#8217;t profitable.<\/li>\r\n<li><b><\/b><strong><b>Put Option:<\/b><\/strong>A put option is &#8220;out of the money&#8221; when the strike price is below\u00a0the current market price of the underlying asset. Exercising it would mean selling the asset at a lower price than its market value, which also isn&#8217;t profitable.<\/li>\r\n<\/ul>\r\n<h2><strong><b>Example as per ITM, ATM and OTM with respect to Power Sector<\/b><\/strong><\/h2>\r\n<h4><strong><b>In the Money (ITM):<\/b><\/strong><\/h4>\r\n<p>Imagine a call option for electricity priced at \u20b95 per unit, while the current market price is \u20b96 per unit. This option is &#8220;in the money&#8221; because exercising it allows the buyer to purchase electricity at \u20b95, which is cheaper than the market price.<\/p>\r\n<p>Similarly, a put option priced at \u20b97 per unit is &#8220;in the money&#8221; if the current market price is \u20b96 per unit. Exercising this option lets the seller sell electricity at \u20b97, higher than the market price.<\/p>\r\n<h4><strong><b>At the Money (ATM):<\/b><\/strong><\/h4>\r\n<p>If the strike price of the option is \u20b96 per unit and the current market price is also \u20b96 per unit, the option is &#8220;at the money.&#8221; Exercising it would result in no intrinsic profit.<\/p>\r\n<h4><strong><b>Out of the Money (OTM):<\/b><\/strong><\/h4>\r\n<p>A call option priced at \u20b97 per unit is &#8220;out of the money&#8221; if the current market price is \u20b96 per unit. Exercising it would mean buying electricity at \u20b97, which is more expensive than the market price.\u00a0\u00a0A put option priced at \u20b95 per unit is &#8220;out of the money&#8221; if the current market price is \u20b96 per unit. Exercising it would mean selling electricity at \u20b95, which is lower than the market price.<\/p><\/div>\n<div id='text_slider_slide02' class='sa_hover_container' data-hash='ITM-vs-ATM-vs-OTM-Options\u2013Risk-Graphs-Explained' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; '><h2><strong><b>2.2 <\/b><\/strong><strong><b>ITM vs ATM vs OTM Options \u2013 Risk \u00a0Graphs Explained<\/b><\/strong><\/h2>\r\n<p><img decoding=\"async\" class=\"aligncenter wp-image-72945 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-vs-ATM-vs-OTM-Options-\u2013-Risk-Graphs-Explained.png\" alt=\"ITM vs ATM vs OTM Options \u2013 Risk \u00a0Graphs Explained\" width=\"932\" height=\"644\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-vs-ATM-vs-OTM-Options-\u2013-Risk-Graphs-Explained.png 932w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-vs-ATM-vs-OTM-Options-\u2013-Risk-Graphs-Explained-300x207.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-vs-ATM-vs-OTM-Options-\u2013-Risk-Graphs-Explained-768x531.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-vs-ATM-vs-OTM-Options-\u2013-Risk-Graphs-Explained-50x35.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-vs-ATM-vs-OTM-Options-\u2013-Risk-Graphs-Explained-100x69.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-vs-ATM-vs-OTM-Options-\u2013-Risk-Graphs-Explained-150x104.png 150w\" sizes=\"(max-width: 932px) 100vw, 932px\" \/><\/p>\r\n<h3><b><\/b><strong><b>ITM Call Option<\/b><\/strong>:<\/h3>\r\n<ul>\r\n<li>The graph will start above zero on the left (showing intrinsic value).<\/li>\r\n<li>It rises steeply with increasing underlying price.<\/li>\r\n<li>The risk is capped by the premium paid (as the price can never go lower than zero).<\/li>\r\n<\/ul>\r\n<p><img decoding=\"async\" class=\"aligncenter wp-image-72552 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/2.1.png\" alt=\"ITM Call option Payoff\" width=\"789\" height=\"442\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/2.1.png 789w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/2.1-300x168.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/2.1-768x430.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/2.1-50x28.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/2.1-100x56.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/2.1-150x84.png 150w\" sizes=\"(max-width: 789px) 100vw, 789px\" \/><\/p>\r\n<p>Imagine you purchase an ITM (In-The-Money) call option with:<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Strike Price<\/b><\/strong>: \u20b9100<\/li>\r\n<li><b><\/b><strong><b>Premium Paid<\/b><\/strong>: \u20b910<\/li>\r\n<\/ul>\r\n<p>Here\u2019s how it plays out at different stock prices at expiry:<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>If the stock price is \u20b990<\/b><\/strong>, you incur a loss of \u20b910 (you can&#8217;t exercise the option, so you only lose the premium).<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9110<\/b><\/strong>, you break even. Your profit from the option is \u20b910 (\u20b9110 &#8211; \u20b9100), which offsets the \u20b910 premium paid.<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9150<\/b><\/strong>, you make a profit of \u20b940. Here\u2019s how: \u20b9150 (stock price) &#8211; \u20b9100 (strike price) &#8211; \u20b910 (premium paid) = \u20b940.<\/li>\r\n<\/ul>\r\n<p>This aligns with the graph&#8217;s key characteristics:<\/p>\r\n<ol>\r\n<li>The graph starts below zero to reflect the premium paid.<\/li>\r\n<li>It flattens until the stock price equals the strike price (no intrinsic value below this point).<\/li>\r\n<li>After crossing the strike price, it rises steeply, showing increasing profits as the stock price climbs.<\/li>\r\n<\/ol>\r\n<h3><b><\/b><strong><b>OTM Call Option<\/b><\/strong>:<\/h3>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72554 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM.png\" alt=\"OTM call option payoff\" width=\"789\" height=\"442\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM.png 789w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-300x168.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-768x430.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-50x28.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-100x56.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-150x84.png 150w\" sizes=\"(max-width: 789px) 100vw, 789px\" \/><\/p>\r\n<ul>\r\n<li>The graph starts at zero, and only increases as the underlying price exceeds the strike price.<\/li>\r\n<li>The risk of loss increases as the price doesn\u2019t move in favor of the option (as it can lose all the premium paid).<\/li>\r\n<\/ul>\r\n<p>Suppose you buy an OTM call option with:<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Strike Price<\/b><\/strong>: \u20b9150<\/li>\r\n<li><b><\/b><strong><b>Premium Paid<\/b><\/strong>: \u20b910<\/li>\r\n<\/ul>\r\n<p>Here\u2019s what happens at different stock prices on expiry:<\/p>\r\n<ol>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9140<\/b><\/strong>, the option expires worthless because the stock price is below the strike price. You lose the entire premium of \u20b910.<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9150<\/b><\/strong>, you still incur a loss of \u20b910 (your premium) because the option doesn\u2019t yield any intrinsic value (the strike price equals the stock price).<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9170<\/b><\/strong>, you make a profit of \u20b910: \u20b9170 (stock price) &#8211; \u20b9150 (strike price) &#8211; \u20b910 (premium paid) = \u20b910.<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9200<\/b><\/strong>, your profit jumps to \u20b940: \u20b9200 (stock price) &#8211; \u20b9150 (strike price) &#8211; \u20b910 (premium paid) = \u20b940.<\/li>\r\n<\/ol>\r\n<p><strong><b>How It Relates to the Graph:<\/b><\/strong><\/p>\r\n<ul>\r\n<li>The graph starts at zero (at strike price \u20b9150) and rises steeply as the stock price exceeds the strike price, showing growing profits.<\/li>\r\n<li>The risk is limited to the premium paid (\u20b910), as the graph never dips below zero.<\/li>\r\n<\/ul>\r\n<h3><b><\/b><strong><b>ATM Call Option<\/b><\/strong>:<\/h3>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72555 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ATM.png\" alt=\"ATM call option payoff\" width=\"789\" height=\"442\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ATM.png 789w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ATM-300x168.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ATM-768x430.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ATM-50x28.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ATM-100x56.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ATM-150x84.png 150w\" sizes=\"(max-width: 789px) 100vw, 789px\" \/><\/p>\r\n<ul>\r\n<li>The graph starts at zero (no intrinsic value).<\/li>\r\n<li>It slopes upward as the underlying price moves higher, but also has time decay working against it (the value decreases over time).<\/li>\r\n<\/ul>\r\n<p>Let\u2019s look at an example of an <strong><b>At-The-Money (ATM) Call Option<\/b><\/strong>\u00a0to explain this graph.<\/p>\r\n<p>Suppose:<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Strike Price<\/b><\/strong>: \u20b9100<\/li>\r\n<li><b><\/b><strong><b>Premium Paid<\/b><\/strong>: \u20b910<\/li>\r\n<\/ul>\r\n<p><strong><b>Scenario on Expiry:<\/b><\/strong><\/p>\r\n<ol>\r\n<li><b><\/b><strong><b>If the stock price is \u20b990<\/b><\/strong>, the option expires worthless as it&#8217;s below the strike price. Your loss equals the premium paid (\u20b910).<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9100<\/b><\/strong>, the option is still worthless since the stock price equals the strike price. Loss = \u20b910 (premium paid).<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9120<\/b><\/strong>, the option becomes profitable: \u20b9120 (stock price) &#8211; \u20b9100 (strike price) &#8211; \u20b910 (premium paid) = \u20b910 profit.<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9150<\/b><\/strong>, your profit increases further: \u20b9150 (stock price) &#8211; \u20b9100 (strike price) &#8211; \u20b910 (premium paid) = \u20b940 profit.<\/li>\r\n<\/ol>\r\n<p><strong><b>Time Decay (Theta Effect):<\/b><\/strong><\/p>\r\n<p>If the current stock price is near \u20b9100 (strike price) before expiry, the call option has time value. For example, even if the stock price is \u20b9100, the option might be worth \u20b95 due to the potential for future movement. However, as the expiration date approaches, the time value erodes, causing the option&#8217;s value to decrease unless the stock price moves significantly higher. This is called time decay.<\/p>\r\n<h4><strong><b>How It Matches the Graph:<\/b><\/strong><\/h4>\r\n<ul>\r\n<li>The graph starts at zero (no intrinsic value at the strike price of \u20b9100).<\/li>\r\n<li>It slopes upward as the stock price rises, showing increasing profit.<\/li>\r\n<li><b><\/b><strong><b>Time decay<\/b><\/strong>works against the option\u2019s value, especially when the stock price is close to the strike price.<\/li>\r\n<\/ul>\r\n<h3><b><\/b><strong><b>ITM Put Option<\/b><\/strong>:<\/h3>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72556 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-PUT-Options.png\" alt=\"ITM PUT Options\" width=\"789\" height=\"442\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-PUT-Options.png 789w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-PUT-Options-300x168.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-PUT-Options-768x430.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-PUT-Options-50x28.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-PUT-Options-100x56.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-PUT-Options-150x84.png 150w\" sizes=\"(max-width: 789px) 100vw, 789px\" \/><\/p>\r\n<ul>\r\n<li>The graph starts above zero, showing intrinsic value as the underlying price is lower than the strike price.<\/li>\r\n<li>The value increases with a falling underlying price.<\/li>\r\n<\/ul>\r\n<p>Imagine you hold an ITM put option with a strike price of \u20b9100. This means you have the right to sell the underlying asset at \u20b9100, regardless of its market price. Now, consider the following scenarios:<\/p>\r\n<ol>\r\n<li><b><\/b><strong><b>Stock price at expiry: \u20b980<\/b><\/strong>You can sell the asset for \u20b9100 even though it&#8217;s only worth \u20b980 in the market, making a profit of \u20b920 per unit.<\/li>\r\n<li><b><\/b><strong><b>Stock price at expiry: \u20b960<\/b><\/strong>Selling at \u20b9100 while the market price is \u20b960 results in a profit of \u20b940 per unit. As the underlying price drops further, your profit continues to increase.<\/li>\r\n<li><b><\/b><strong><b>Stock price at expiry: \u20b9120<\/b><\/strong>Here, the asset is worth more in the market than the strike price. Therefore, you wouldn\u2019t exercise your option, resulting in a small loss\u2014approximately \u20b910 in this case.<\/li>\r\n<\/ol>\r\n<p>This payoff structure illustrates how the graph starts above zero (representing intrinsic value) and increases as the underlying price falls below the strike price<\/p>\r\n<h3><b><\/b><strong><b>O<\/b><\/strong><strong><b>TM Put Option<\/b><\/strong>:<\/h3>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72557 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-put-Options.png\" alt=\"OTM put Options\" width=\"789\" height=\"442\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-put-Options.png 789w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-put-Options-300x168.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-put-Options-768x430.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-put-Options-50x28.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-put-Options-100x56.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-put-Options-150x84.png 150w\" sizes=\"(max-width: 789px) 100vw, 789px\" \/><\/p>\r\n<ul>\r\n<li>The graph starts at zero and increases as the underlying price falls.<\/li>\r\n<li>The risk of loss increases as the underlying price doesn\u2019t fall below the strike price.<\/li>\r\n<\/ul>\r\n<p>\u20b9100 (strike price) &#8211; \u20b970 (stock price) &#8211; \u20b910 (premium paid) = \u20b920 profit per un<\/p>\r\n<p>An OTM put option payoff graph represents the outcome when the underlying price stays above the strike price initially, and profits rise as the price falls below the strike price. Here&#8217;s an example:<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Strike Price:<\/b><\/strong>\u20b9100<\/li>\r\n<li><b><\/b><strong><b>Put Option Premium:<\/b><\/strong>\u20b910<\/li>\r\n<\/ul>\r\n<p><b><\/b><strong><b>Scenario 1: <\/b><\/strong>Stock Price at Expiry = \u20b970 You have the right to sell the stock at \u20b9100, while it&#8217;s worth \u20b970 in the market. Your profit:<\/p>\r\n<p><strong><b>Scenario 2:<\/b><\/strong>\u00a0Stock Price at Expiry = \u20b990<\/p>\r\n<ul>\r\n<li>\u20b9100 &#8211; \u20b990 &#8211; \u20b910 = \u20b90. The premium paid matches the intrinsic value, resulting in no profit.<\/li>\r\n<\/ul>\r\n<p><strong><b>Scenario 3:<\/b><\/strong>\u00a0Stock Price at Expiry = \u20b9110 Here, the stock is worth more in the market than your strike price. You don&#8217;t exercise the option. Your loss is capped at \u20b910 (the premium paid).<\/p>\r\n<p>This aligns with the graph\u2014profit rises when prices fall below \u20b9100, and the loss (premium) stays fixed when prices stay above \u20b9100.<\/p>\r\n<h3><b><\/b><strong><b>ATM Put Option<\/b><\/strong>:<\/h3>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72558 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/atm-put-1.png\" alt=\"Atm put options\" width=\"789\" height=\"442\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/atm-put-1.png 789w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/atm-put-1-300x168.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/atm-put-1-768x430.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/atm-put-1-50x28.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/atm-put-1-100x56.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/atm-put-1-150x84.png 150w\" sizes=\"(max-width: 789px) 100vw, 789px\" \/><\/p>\r\n<ul>\r\n<li>The graph starts at zero (no intrinsic value).<\/li>\r\n<li>It increases as the underlying price moves lower, with similar time decay effects.<\/li>\r\n<\/ul>\r\n<p>Example of ATM (At-the-Money) Put Option, where the strike price is \u20b9100 and the premium paid for the option is \u20b910:<\/p>\r\n<p><strong><b>Examples:<\/b><\/strong><\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Stock price at expiry: \u20b980<\/b><\/strong>You exercise the put option to sell at \u20b9100 while the stock is worth \u20b980 in the market.<\/li>\r\n<li><strong><b>Payoff calculation:<\/b><\/strong> \u20b9100 (strike price) &#8211; \u20b980 (stock price) = \u20b920 After deductng the premium: \u20b920 &#8211; \u20b910 = \u20b910 profit.<\/li>\r\n<li><b><\/b><strong><b>Stock price at expiry: \u20b9100<\/b><\/strong>Since the stock price is equal to the strike price, there&#8217;s no intrinsic value.<\/li>\r\n<li><strong><b>Payoff calculation:<\/b><\/strong>\u00a0\u20b9100 &#8211; \u20b9100 = \u20b90 After deducting the premium: \u20b90 &#8211; \u20b910 = \u20b910 loss.<\/li>\r\n<\/ul>\r\n<p><b><\/b><strong><b>Stock price at expiry: \u20b9120<\/b><\/strong><\/p>\r\n<p>The stock price is higher than the strike price, so the option is not exercised, resulting in a loss.\u00a0Payoff calculation:\u00a0\u20b90 &#8211; \u20b910 = \u20b910 loss.<\/p>\r\n<p>This aligns with the graph: the payoff starts at zero when the stock price equals the strike price (\u20b9100). As the stock price falls below \u20b9100, the payoff rises, offsetting the premium paid. Losses, however, are capped at the premium when the stock price stays above the strike price.<\/p>\r\n<h3><strong><b>Summary of Risk Profiles:<\/b><\/strong><\/h3>\r\n<ul>\r\n<li><b><\/b><strong><b>ITM Options<\/b><\/strong>: Lower risk, as there is intrinsic value. Profit increases with favorable movement in the underlying.<\/li>\r\n<li><b><\/b><strong><b>OTM Options<\/b><\/strong>: Higher risk, as they have no intrinsic value and are entirely dependent on the price moving significantly in the favorable direction.<\/li>\r\n<li><b><\/b><strong><b>ATM Options<\/b><\/strong>: Moderate risk, as they are dependent on the underlying price moving significantly and are subject to time decay.<\/li>\r\n<\/ul><\/div>\n<div id='text_slider_slide03' class='sa_hover_container' data-hash='Option-Seller-Risk-Profile\u2013Short-Calls-and-Puts' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; '><h2><strong><b>2.3 Option Seller Risk Profile \u2013 Short Calls \u00a0and Puts<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72946 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Seller-Risk-Profile-\u2013-Short-Calls-and-Puts.png\" alt=\"Option Seller Risk Profile \u2013 Short Calls \u00a0and Puts\" width=\"882\" height=\"667\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Seller-Risk-Profile-\u2013-Short-Calls-and-Puts.png 882w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Seller-Risk-Profile-\u2013-Short-Calls-and-Puts-300x227.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Seller-Risk-Profile-\u2013-Short-Calls-and-Puts-768x581.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Seller-Risk-Profile-\u2013-Short-Calls-and-Puts-50x38.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Seller-Risk-Profile-\u2013-Short-Calls-and-Puts-100x76.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Seller-Risk-Profile-\u2013-Short-Calls-and-Puts-150x113.png 150w\" sizes=\"(max-width: 882px) 100vw, 882px\" \/><\/p>\r\n<table style=\"height: 282px\" width=\"1218\">\r\n<tbody>\r\n<tr>\r\n<td width=\"272\">\r\n<p><strong><b>Option Type<\/b><\/strong><\/p>\r\n<\/td>\r\n<td width=\"234\">\r\n<p><strong><b>\u00a0Max Profit<\/b><\/strong><\/p>\r\n<\/td>\r\n<td width=\"218\">\r\n<p><strong><b>\u00a0Max Loss<\/b><\/strong><\/p>\r\n<\/td>\r\n<td width=\"339\">\r\n<p><strong><b>Ideal Market<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Buy Call \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/p>\r\n<\/td>\r\n<td>\r\n<p>Unlimited<\/p>\r\n<\/td>\r\n<td>\r\n<p>Premium<\/p>\r\n<\/td>\r\n<td>\r\n<p>Bullish<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Sell Call<\/p>\r\n<\/td>\r\n<td>\r\n<p>Premium<\/p>\r\n<\/td>\r\n<td>\r\n<p>Unlimited<\/p>\r\n<\/td>\r\n<td>\r\n<p>Bearish\/Neutral<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Buy Put<\/p>\r\n<\/td>\r\n<td>\r\n<p>High (if price drops)<\/p>\r\n<\/td>\r\n<td>\r\n<p>Premium<\/p>\r\n<\/td>\r\n<td>\r\n<p>Bearish<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Sell \u00a0Put<\/p>\r\n<\/td>\r\n<td>\r\n<p>Premium<\/p>\r\n<\/td>\r\n<td>\r\n<p>High (if price falls)<\/p>\r\n<\/td>\r\n<td>\r\n<p>Bullish\/ Neutral<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p>&nbsp;<\/p>\r\n<h2><strong><b>1. <\/b><\/strong><strong><b>Selling a Call Option (Short Call)<\/b><\/strong><\/h2>\r\n<p><strong><b>Maximum Profit:<\/b><\/strong>\u00a0Limited to the premium received.<br \/><strong><b>Maximum Loss:<\/b><\/strong>\u00a0Unlimited (if the stock price rises significantly).<br \/><strong><b>Break-even Point:<\/b><\/strong>\u00a0Strike Price + Premium Received.<\/p>\r\n<h3><strong><b>Risk Analysis<\/b><\/strong><\/h3>\r\n<ul>\r\n<li>The seller of a call option is obligated to sell the asset at the strike price if the buyer exercises the option.<\/li>\r\n<li>If the stock price stays belowthe strike price, the option expires worthless, and the seller keeps the premium as profit.<\/li>\r\n<li>If the stock price rises abovethe strike price, the seller must buy the stock at the market price and sell it at the strike price, leading to unlimited losses\u00a0as the stock price can theoretically rise indefinitely.<\/li>\r\n<li>This strategy is very risky, especially if the stock price moves sharply upwards.<\/li>\r\n<\/ul>\r\n<h3><strong><b>Example of Short Call Risk<\/b><\/strong><\/h3>\r\n<ul>\r\n<li>Strike Price: \u20b9100<\/li>\r\n<li>Premium Received: \u20b95<\/li>\r\n<li>If the stock closes at \u20b995, the option expires worthless, and the seller keeps the \u20b95 premium.<\/li>\r\n<li>If the stock closes at \u20b9120, the seller has to sell at \u20b9100 but buy at \u20b9120, leading to a loss of \u20b915 per share (\u20b920 loss &#8211; \u20b95 premium).<\/li>\r\n<li>If the stock jumps to \u20b9200, the seller faces a massive loss of \u20b995 per share.<\/li>\r\n<\/ul>\r\n<h3><strong><b>Who Uses This Strategy?<\/b><\/strong><\/h3>\r\n<ul>\r\n<li>Traders who believe that the stock price won&#8217;t rise significantly.<\/li>\r\n<li>Investors who own the stock and write covered calls to generate extra income (covered call strategy).<\/li>\r\n<\/ul>\r\n<h2><strong><b>2. Selling a Put Option (Short Put)<\/b><\/strong><\/h2>\r\n<p><strong><b>Maximum Profit:<\/b><\/strong>\u00a0Limited to the premium received.<\/p>\r\n<p><strong><b>Maximum Loss:<\/b><\/strong>\u00a0Significant but <strong><b>limited<\/b><\/strong>\u00a0(if the stock price falls to zero).<br \/><strong><b>Break-even Point:<\/b><\/strong>\u00a0Strike Price &#8211; Premium Received.<\/p>\r\n<h3><strong><b>Risk Analysis<\/b><\/strong><\/h3>\r\n<ul>\r\n<li>The seller of a put option is obligated to buythe asset at the strike price if the buyer exercises the option.<\/li>\r\n<li>If the stock price stays abovethe strike price, the option expires worthless, and the seller keeps the premium as profit.<\/li>\r\n<li>If the stock price drops significantly, the seller must buy the stock at the strike price, which can lead to substantial lossesif the stock collapses.<\/li>\r\n<li>The maximum loss occurs when the stock price falls to zero, meaning the seller must buy a worthless stock at the strike price.<\/li>\r\n<\/ul>\r\n<h3><strong><b>Example of Short Put Risk<\/b><\/strong><\/h3>\r\n<ul>\r\n<li>Strike Price: \u20b9100<\/li>\r\n<li>Premium Received: \u20b95<\/li>\r\n<li>If the stock closes at \u20b9105, the option expires worthless, and the seller keeps the \u20b95 premium.<\/li>\r\n<li>If the stock closes at \u20b980, the seller must buy at \u20b9100, leading to a loss of \u20b915 per share (\u20b920 loss &#8211; \u20b95 premium).<\/li>\r\n<li>If the stock drops to \u20b920, the seller faces a loss of \u20b975 per share.<\/li>\r\n<li>If the company goes bankrupt (\u20b90 stock price), the seller suffers a maximum loss of \u20b995 per share.<\/li>\r\n<\/ul>\r\n<h3><strong><b>Who Uses This Strategy?<\/b><\/strong><\/h3>\r\n<ul>\r\n<li>Traders who believe that the stock price won\u2019t fall significantly.<\/li>\r\n<li>Investors who want to buy a stock at a lower price(cash-secured put strategy).<\/li>\r\n<\/ul>\r\n<h2><strong><b>Key Takeaways<\/b><\/strong><\/h2>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td>\r\n<p><strong><b>Option Type<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Maximum Profit<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Maximum Loss<\/b><\/strong><\/p>\r\n<\/td>\r\n<td width=\"515\">\r\n<p><strong><b>Ideal Market Condition<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Short Call<\/p>\r\n<\/td>\r\n<td>\r\n<p>Limited to premium<\/p>\r\n<\/td>\r\n<td>\r\n<p>Unlimited<\/p>\r\n<\/td>\r\n<td width=\"515\">\r\n<p>Bearish or Neutral<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Short Put<\/p>\r\n<\/td>\r\n<td>\r\n<p>Limited to premium<\/p>\r\n<\/td>\r\n<td>\r\n<p>Significant (Stock Price \u2192 0)<\/p>\r\n<\/td>\r\n<td width=\"515\">\r\n<p>Bullish or Neutral<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p><strong><b>\u00a0<\/b><\/strong><\/p>\r\n<p><strong><b>\u00a0<\/b><\/strong><\/p>\r\n<p><strong><b>\u00a0<\/b><\/strong><\/p>\r\n<p><strong><b>\u00a0<\/b><\/strong><\/p><\/div>\n<div id='text_slider_slide04' class='sa_hover_container' data-hash='Real-Life-Example-of-Buying-a-Put-Option-for-Hedging' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; '><h2><strong><b>2.4 <\/b><\/strong><strong><b>Real-Life Example of Buying a Put Option \u00a0for Hedging<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72947 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Real-Life-Example-of-Buying-a-Put-Option-for-Hedging.png\" alt=\"Real-Life Example of Buying a Put Option \u00a0for Hedging\" width=\"894\" height=\"658\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Real-Life-Example-of-Buying-a-Put-Option-for-Hedging.png 894w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Real-Life-Example-of-Buying-a-Put-Option-for-Hedging-300x221.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Real-Life-Example-of-Buying-a-Put-Option-for-Hedging-768x565.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Real-Life-Example-of-Buying-a-Put-Option-for-Hedging-50x37.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Real-Life-Example-of-Buying-a-Put-Option-for-Hedging-100x74.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Real-Life-Example-of-Buying-a-Put-Option-for-Hedging-150x110.png 150w\" sizes=\"(max-width: 894px) 100vw, 894px\" \/><\/p>\r\n<p>&nbsp;<\/p>\r\n<h2><strong><b> <img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72559 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ravi-put-option.png\" alt=\"ravi put option\" width=\"789\" height=\"479\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ravi-put-option.png 789w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ravi-put-option-300x182.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ravi-put-option-768x466.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ravi-put-option-50x30.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ravi-put-option-100x61.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ravi-put-option-150x91.png 150w\" sizes=\"(max-width: 789px) 100vw, 789px\" \/><\/b><\/strong><\/h2>\r\n<p><strong><b>\u00a0<\/b><\/strong><\/p>\r\n<p>Imagine Ravi is\u00a0an investor holding shares of Reliance Industries, currently trading at \u20b92,500 per share. Ravi is concerned about a potential drop in the stock price due to market volatility. To protect his investment, he\u00a0decided\u00a0to buy a put option with a strike price of \u20b92,400, expiring in one month. The premium for this option is \u20b950 per share.<\/p>\r\n<p><strong><b>Scenario 1: Stock price falls below \u20b92,400<\/b><\/strong>\u00a0If the stock price drops to \u20b92,300 before the option expires, Ravi\u00a0can exercise the put option and sell shares at \u20b92,400 instead of the lower market price of \u20b92,300. This minimizes his losses, as he\u00a0effectively locked in a selling price of \u20b92,400. After accounting for the \u20b950 premium, his \u00a0net selling price is \u20b92,350, which is still better than \u20b92,300.<\/p>\r\n<p><strong><b>Scenario 2: Stock price stays above \u20b92,400<\/b><\/strong>\u00a0If the stock price remains above \u20b92,400 (e.g., \u20b92,600), Ravi\u00a0wouldn&#8217;t exercise the put option, as he\u00a0can sell shares at the higher market price. In this case, the put option expires worthless, and his only loss is the \u20b950 premium he\u00a0paid.<\/p>\r\n<p>This example demonstrates how put options can act as a safety net for investors, helping them manage risks in a volatile market.<\/p><\/div>\n<div id='text_slider_slide05' class='sa_hover_container' data-hash='Put-Options-quotes-and-screens-on-a-Trading-platform' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; '><h2><strong><b>2.5 <\/b><\/strong><strong><b>Put Options quotes and screens on a Trading platform<\/b><\/strong><\/h2>\r\n<p>&nbsp;<\/p>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72948 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Understanding-Put-Options-Definition-Use-Cases-Profit-Scenarios-1.png\" alt=\"Understanding Put Options Definition, Use Cases, Profit Scenarios\" width=\"796\" height=\"864\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Understanding-Put-Options-Definition-Use-Cases-Profit-Scenarios-1.png 796w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Understanding-Put-Options-Definition-Use-Cases-Profit-Scenarios-1-276x300.png 276w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Understanding-Put-Options-Definition-Use-Cases-Profit-Scenarios-1-768x834.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Understanding-Put-Options-Definition-Use-Cases-Profit-Scenarios-1-46x50.png 46w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Understanding-Put-Options-Definition-Use-Cases-Profit-Scenarios-1-92x100.png 92w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Understanding-Put-Options-Definition-Use-Cases-Profit-Scenarios-1-150x163.png 150w\" sizes=\"(max-width: 796px) 100vw, 796px\" \/><\/p>\r\n<p>&nbsp;<\/p>\r\n<p>Put options quotes and screens are typically displayed on trading platforms through an options chain. This chain provides detailed information about various strike prices, expiration dates, and premiums for both call and put options.<\/p>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72560 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/SCREENSHOT.png\" alt=\"Option Chain Screenshot\" width=\"396\" height=\"449\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/SCREENSHOT.png 396w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/SCREENSHOT-265x300.png 265w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/SCREENSHOT-44x50.png 44w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/SCREENSHOT-88x100.png 88w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/SCREENSHOT-150x170.png 150w\" sizes=\"(max-width: 396px) 100vw, 396px\" \/><\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Options Chain<\/b><\/strong>: The chain shows strike prices in the middle column, with bid and ask prices for calls and puts on either side. You can select specific strike prices to view detailed quotes.<\/li>\r\n<\/ul>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72561 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Untitled-4.png\" alt=\"Options Chain\" width=\"720\" height=\"320\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Untitled-4.png 720w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Untitled-4-300x133.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Untitled-4-50x22.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Untitled-4-100x44.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Untitled-4-150x67.png 150w\" sizes=\"(max-width: 720px) 100vw, 720px\" \/><\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Expiry Dates<\/b><\/strong>: Platforms allow you to toggle between different expiration dates, such as near-term or long-term options.<\/li>\r\n<li><b><\/b><strong><b>Market Data<\/b><\/strong>: Real-time streaming quotes for the underlying asset and options are available if you subscribe to market data add-ons.<\/li>\r\n<li><b><\/b><strong><b>Customizable Screens<\/b><\/strong>: Many platforms let you add or remove data columns, set up alerts, and group positions for better analysis<\/li>\r\n<\/ul><\/div>\n<div id='text_slider_slide06' class='sa_hover_container' data-hash='Option-Chain-Parameters-for-Put-Options' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; '><h2><strong><b>2.6 <\/b><\/strong><strong><b>Option Chain Parameters for Put Options<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72949 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Chain-Parameters-for-Put-Options.png\" alt=\"Option Chain Parameters for Put Options\" width=\"948\" height=\"809\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Chain-Parameters-for-Put-Options.png 948w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Chain-Parameters-for-Put-Options-300x256.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Chain-Parameters-for-Put-Options-768x655.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Chain-Parameters-for-Put-Options-50x43.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Chain-Parameters-for-Put-Options-100x85.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Chain-Parameters-for-Put-Options-150x128.png 150w\" sizes=\"(max-width: 948px) 100vw, 948px\" \/><\/p>\r\n<h3>1. <strong><b>Strike Price<\/b><\/strong><\/h3>\r\n<p>The strike price is the predetermined price at which the holder of a put option can sell the underlying asset. It forms the backbone of the option chain. For instance, in the option chain for Reliance Industries, strike prices might range from \u20b92,300 to \u20b92,700 in intervals (e.g., \u20b92,300, \u20b92,350, \u20b92,400, and so on). Each strike price has unique associated data like premium, open interest, etc.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If Reliance Industries is trading at \u20b92,500, you might choose a strike price of \u20b92,400 to hedge against a possible price drop.<\/p>\r\n<h3>2. <strong><b>Premium (Last Traded Price &#8211; LTP)<\/b><\/strong><\/h3>\r\n<p>The premium is the cost of purchasing the put option, calculated per share. It reflects the current value of the option based on factors like market sentiment, time to expiration, and implied volatility.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If the premium for a \u20b92,400 strike price put option is \u20b950, you would pay \u20b950 per share to secure the right to sell at \u20b92,400.<\/p>\r\n<h3>3. <strong><b>Open Interest (OI)<\/b><\/strong><\/h3>\r\n<p>Open interest is the total number of contracts that are currently active for a particular strike price. It indicates market activity and liquidity for that option.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If there are 5,000 contracts with the \u20b92,400 strike price, this is the open interest. Higher open interest suggests significant market interest in this option.<\/p>\r\n<h3>4. <strong><b>Change in Open Interest <\/b><\/strong><\/h3>\r\n<p>This shows the difference in open interest from the previous trading session. A positive change indicates more contracts have been opened, signaling increased market activity.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If the open interest for the \u20b92,400 strike price put option increases from 5,000 to 5,500, the change in open interest is +500 contracts.<\/p>\r\n<h3>5. <strong><b>Volume<\/b><\/strong><\/h3>\r\n<p>Volume is the number of option contracts traded during the current trading session. Higher volume can indicate active trading and greater interest in that strike price.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If 2,000 contracts of the \u20b92,400 strike price put option were traded today, that\u2019s the volume.<\/p>\r\n<h3>6. <strong><b>Implied Volatility (IV)<\/b><\/strong><\/h3>\r\n<p>Implied volatility measures the market\u2019s expectation of future price fluctuations for the underlying asset. Options with higher IVs tend to have higher premiums.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If the IV of a \u20b92,400 strike price put option is 30%, this indicates higher market uncertainty and results in a higher premium compared to an option with lower IV.<\/p>\r\n<h3>7. <strong><b>Bid Price and Ask Price<\/b><\/strong><\/h3>\r\n<p>These represent the price range at which buyers and sellers are willing to transact. The bid price is the highest price a buyer is willing to pay, while the ask price is the lowest price a seller is willing to accept.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0For a \u20b92,400 strike price put option:<\/p>\r\n<ul>\r\n<li>Bid price: \u20b948<\/li>\r\n<li>Ask price: \u20b952<\/li>\r\n<\/ul>\r\n<p>This means buyers are ready to pay \u20b948, while sellers want \u20b952.<\/p>\r\n<h3>8. <strong><b>Net Change<\/b><\/strong><\/h3>\r\n<p>This reflects the change in the option\u2019s premium compared to the previous day\u2019s closing price.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If the premium for the \u20b92,400 strike price put option increased from \u20b950 to \u20b955 today, the net change is +\u20b95.<\/p>\r\n<h3>9. <strong><b>ITM, ATM, and OTM (Intrinsic Value)<\/b><\/strong><\/h3>\r\n<p>These terms classify options based on the relationship between the strike price and the current price of the underlying asset:<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>In-the-Money (ITM)<\/b><\/strong>: Strike price is below the current market price of the underlying asset. The put option has intrinsic value.<\/li>\r\n<li><b><\/b><strong><b>At-the-Money (ATM)<\/b><\/strong>: Strike price is equal to the current market price. The option has no intrinsic value, but time value remains.<\/li>\r\n<li><b><\/b><strong><b>Out-of-the-Money (OTM)<\/b><\/strong>: Strike price is above the current market price. The option has no intrinsic value.<\/li>\r\n<\/ul>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If Reliance Industries is trading at \u20b92,500:<\/p>\r\n<ul>\r\n<li>\u20b92,400 strike price: <strong><b>ITM<\/b><\/strong><\/li>\r\n<li>\u20b92,500 strike price: <strong><b>ATM<\/b><\/strong><\/li>\r\n<li>\u20b92,600 strike price: <strong><b>OTM<\/b><\/strong><\/li>\r\n<\/ul><\/div>\n<div id='text_slider_slide07' class='sa_hover_container' data-hash='Using-Put-Options-spreads-to-limit-risk' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; '><h2><strong><b>2.7 Using Put Options spreads to limit risk<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72950 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Using-Put-Options-spreads-to-limit-risk.png\" alt=\"Using Put Options spreads to limit risk\" width=\"657\" height=\"657\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Using-Put-Options-spreads-to-limit-risk.png 657w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Using-Put-Options-spreads-to-limit-risk-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Using-Put-Options-spreads-to-limit-risk-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Using-Put-Options-spreads-to-limit-risk-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Using-Put-Options-spreads-to-limit-risk-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Using-Put-Options-spreads-to-limit-risk-96x96.png 96w\" sizes=\"(max-width: 657px) 100vw, 657px\" \/><\/p>\r\n<p>Put option spreads are a strategic way to limit risk while managing costs in options trading. Here are some common types of put spreads and how they work:<\/p>\r\n<h3><strong><b>1. <\/b><\/strong><strong><b>Bear Put Spread<\/b><\/strong><\/h3>\r\n<ul>\r\n<li><b><\/b><strong><b>How it works<\/b><\/strong><strong><b>:<\/b><\/strong>This strategy involves buying a put option at a higher strike price and selling another put option at a lower strike price on the same underlying asset and expiration date.<\/li>\r\n<li><b><\/b><strong><b>Purpose<\/b><\/strong><strong><b>: <\/b><\/strong>It limits potential losses while reducing the cost of the trade.<\/li>\r\n<li><b><\/b><strong><b>Example<\/b><\/strong><strong><b>:<\/b><\/strong>Suppose a stock is trading at \u20b91,000. You buy a put option with a strike price of \u20b91,050 (premium \u20b950) and sell a put option with a strike price of \u20b9950 (premium \u20b920). Your net cost is \u20b930, and your maximum profit is \u20b970 if the stock price falls below \u20b9950.<\/li>\r\n<\/ul>\r\n<h3><strong><b>2. <\/b><\/strong><strong><b>Bull Put Spread<\/b><\/strong><\/h3>\r\n<ul>\r\n<li><b><\/b><strong><b>How it works<\/b><\/strong><strong><b>:<\/b><\/strong>This strategy involves selling a put option at a higher strike price and buying another put option at a lower strike price.<\/li>\r\n<li><b><\/b><strong><b>Purpose<\/b><\/strong><strong><b>: <\/b><\/strong>It generates income while limiting downside risk.<\/li>\r\n<li><b><\/b><strong><b>Example<\/b><\/strong><strong><b>: <\/b><\/strong>Suppose a stock is trading at \u20b91,000. You sell a put option with a strike price of \u20b9950 (premium \u20b920) and buy a put option with a strike price of \u20b9900 (premium \u20b910). Your net credit is \u20b910, and your maximum loss is \u20b940 if the stock price falls below \u20b9900.<\/li>\r\n<\/ul>\r\n<h3><strong><b>3. <\/b><\/strong><strong><b>Protective Put Spread<\/b><\/strong><\/h3>\r\n<ul>\r\n<li><b><\/b><strong><b>How it works<\/b><\/strong><strong><b>:<\/b><\/strong>This strategy involves buying a put option to protect an existing stock position and selling another put option at a lower strike price to offset the cost.<\/li>\r\n<li><b><\/b><strong><b>Purpose<\/b><\/strong><strong><b>: <\/b><\/strong>It provides downside protection while reducing the cost of the hedge.<\/li>\r\n<li><b><\/b><strong><b>Example<\/b><\/strong><strong><b>:<\/b><\/strong>If you own shares of a stock trading at \u20b91,000, you buy a put option with a strike price of \u20b9950 (premium \u20b950) and sell a put option with a strike price of \u20b9900 (premium \u20b920). Your net cost is \u20b930, and you\u2019re protected against losses below \u20b9950.<\/li>\r\n<\/ul><\/div>\n<\/div>\n<\/div>\n<script type='text\/javascript'>\n\tjQuery(document).ready(function() {\n\t\tjQuery('#text_slider').owlCarousel({\n\t\t\titems : 1,\n\t\t\tsmartSpeed : 400,\n\t\t\tautoplay : false,\n\t\t\tautoplayHoverPause : false,\n\t\t\tsmartSpeed : 400,\n\t\t\tfluidSpeed : 400,\n\t\t\tautoplaySpeed : 400,\n\t\t\tnavSpeed : 400,\n\t\t\tdotsSpeed : 400,\n\t\t\tdotsEach : 1,\n\t\t\tloop : false,\n\t\t\tnav : true,\n\t\t\tnavText : ['Previous','Next'],\n\t\t\tdots : true,\n\t\t\tresponsiveRefreshRate : 200,\n\t\t\tslideBy : 1,\n\t\t\tmergeFit : true,\n\t\t\tautoHeight : true,\n\t\t\tmouseDrag : false,\n\t\t\ttouchDrag : true\n\t\t});\n\t\tjQuery('#text_slider').css('visibility', 'visible');\n\t\tvar owl_goto = jQuery('#text_slider');\n\t\tjQuery('.text_slider_goto1').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 0);\n\t\t});\n\t\tjQuery('.text_slider_goto2').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 1);\n\t\t});\n\t\tjQuery('.text_slider_goto3').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 2);\n\t\t});\n\t\tjQuery('.text_slider_goto4').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 3);\n\t\t});\n\t\tjQuery('.text_slider_goto5').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 4);\n\t\t});\n\t\tjQuery('.text_slider_goto6').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 5);\n\t\t});\n\t\tjQuery('.text_slider_goto7').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 6);\n\t\t});\n\t\tvar resize_72543 = jQuery('.owl-carousel');\n\t\tresize_72543.on('initialized.owl.carousel', function(e) {\n\t\t\tif (typeof(Event) === 'function') {\n\t\t\t\twindow.dispatchEvent(new Event('resize'));\n\t\t\t} else {\n\t\t\t\tvar evt = window.document.createEvent('UIEvents');\n\t\t\t\tevt.initUIEvent('resize', true, false, window, 0);\n\t\t\t\twindow.dispatchEvent(evt);\n\t\t\t}\n\t\t});\n\t});\n<\/script>\n<\/p>                    <\/div>\n\t\t        \n                    <div id=\"videos-tab\" class=\"clearfix eael-tab-content-item \" data-title-link=\"videos-tab\">\n\t\t\t\t        <div class=\"yt_iframe\"><table class=\"wp-list-table widefat fixed striped table-view-list posts\"><tbody id=\"the-list\"><tr id=\"post-72543\" class=\"iedit author-self level-0 post-72543 type-sa_slider status-publish hentry\"><td class=\"shortcode column-shortcode\" data-colname=\"Shortcode\"><div class='white' style='background:rgb(255, 255, 255); border:solid 0px rgb(255, 255, 255); border-radius:0px; padding:0px 0px 0px 1px;'>\n<div id='text_slider' class='owl-carousel sa_owl_theme owl-pagination-true' data-slider-id='text_slider' style='visibility: visible;visibility:visible;'>\n<div id='text_slider_slide01' class='sa_hover_container' data-hash='What-Are-ITM-ATM-and-OTM-Options ' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; '><h2>2.1 <strong><b>What Are ITM, ATM, and OTM Options?\u00a0<\/b><\/strong><\/h2>\r\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"aligncenter wp-image-72944 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/What-are-Options-Greek.png\" alt=\"What Are ITM, ATM, and OTM Options? Definitions and Examples\" width=\"885\" height=\"685\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/What-are-Options-Greek.png 885w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/What-are-Options-Greek-300x232.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/What-are-Options-Greek-768x594.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/What-are-Options-Greek-50x39.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/What-are-Options-Greek-100x77.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/What-are-Options-Greek-150x116.png 150w\" sizes=\"(max-width: 885px) 100vw, 885px\" \/><\/p>\r\n<h3><strong><b>In the Money (ITM):<\/b><\/strong><\/h3>\r\n<ul>\r\n<li><b><\/b><strong><b>Call Option:<\/b><\/strong>A call option is &#8220;in the money&#8221; when the strike price is below\u00a0the current market price of the underlying asset. This means exercising the option would allow the buyer to purchase the asset at a lower price than its current market value.<\/li>\r\n<li><b><\/b><strong><b>Put Option:<\/b><\/strong>A put option is &#8220;in the money&#8221; when the strike price is above\u00a0the current market price of the underlying asset. This means exercising the option would allow the buyer to sell the asset at a higher price than its current market value.<\/li>\r\n<\/ul>\r\n<h3><strong><b>At the Money (ATM):<\/b><\/strong><\/h3>\r\n<p>An option is considered &#8220;at the money&#8221; when the strike price is equal to or very close to\u00a0the current market price of the underlying asset. In this case, exercising the option results in no intrinsic profit.<\/p>\r\n<h3><strong><b>Out of the Money (OTM):<\/b><\/strong><\/h3>\r\n<ul>\r\n<li><b><\/b><strong><b>Call Option:<\/b><\/strong>A call option is &#8220;out of the money&#8221; when the strike price is above\u00a0the current market price of the underlying asset. Exercising it would mean buying the asset at a price higher than its market value, which isn&#8217;t profitable.<\/li>\r\n<li><b><\/b><strong><b>Put Option:<\/b><\/strong>A put option is &#8220;out of the money&#8221; when the strike price is below\u00a0the current market price of the underlying asset. Exercising it would mean selling the asset at a lower price than its market value, which also isn&#8217;t profitable.<\/li>\r\n<\/ul>\r\n<h2><strong><b>Example as per ITM, ATM and OTM with respect to Power Sector<\/b><\/strong><\/h2>\r\n<h4><strong><b>In the Money (ITM):<\/b><\/strong><\/h4>\r\n<p>Imagine a call option for electricity priced at \u20b95 per unit, while the current market price is \u20b96 per unit. This option is &#8220;in the money&#8221; because exercising it allows the buyer to purchase electricity at \u20b95, which is cheaper than the market price.<\/p>\r\n<p>Similarly, a put option priced at \u20b97 per unit is &#8220;in the money&#8221; if the current market price is \u20b96 per unit. Exercising this option lets the seller sell electricity at \u20b97, higher than the market price.<\/p>\r\n<h4><strong><b>At the Money (ATM):<\/b><\/strong><\/h4>\r\n<p>If the strike price of the option is \u20b96 per unit and the current market price is also \u20b96 per unit, the option is &#8220;at the money.&#8221; Exercising it would result in no intrinsic profit.<\/p>\r\n<h4><strong><b>Out of the Money (OTM):<\/b><\/strong><\/h4>\r\n<p>A call option priced at \u20b97 per unit is &#8220;out of the money&#8221; if the current market price is \u20b96 per unit. Exercising it would mean buying electricity at \u20b97, which is more expensive than the market price.\u00a0\u00a0A put option priced at \u20b95 per unit is &#8220;out of the money&#8221; if the current market price is \u20b96 per unit. Exercising it would mean selling electricity at \u20b95, which is lower than the market price.<\/p><\/div>\n<div id='text_slider_slide02' class='sa_hover_container' data-hash='ITM-vs-ATM-vs-OTM-Options\u2013Risk-Graphs-Explained' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; '><h2><strong><b>2.2 <\/b><\/strong><strong><b>ITM vs ATM vs OTM Options \u2013 Risk \u00a0Graphs Explained<\/b><\/strong><\/h2>\r\n<p><img decoding=\"async\" class=\"aligncenter wp-image-72945 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-vs-ATM-vs-OTM-Options-\u2013-Risk-Graphs-Explained.png\" alt=\"ITM vs ATM vs OTM Options \u2013 Risk \u00a0Graphs Explained\" width=\"932\" height=\"644\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-vs-ATM-vs-OTM-Options-\u2013-Risk-Graphs-Explained.png 932w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-vs-ATM-vs-OTM-Options-\u2013-Risk-Graphs-Explained-300x207.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-vs-ATM-vs-OTM-Options-\u2013-Risk-Graphs-Explained-768x531.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-vs-ATM-vs-OTM-Options-\u2013-Risk-Graphs-Explained-50x35.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-vs-ATM-vs-OTM-Options-\u2013-Risk-Graphs-Explained-100x69.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-vs-ATM-vs-OTM-Options-\u2013-Risk-Graphs-Explained-150x104.png 150w\" sizes=\"(max-width: 932px) 100vw, 932px\" \/><\/p>\r\n<h3><b><\/b><strong><b>ITM Call Option<\/b><\/strong>:<\/h3>\r\n<ul>\r\n<li>The graph will start above zero on the left (showing intrinsic value).<\/li>\r\n<li>It rises steeply with increasing underlying price.<\/li>\r\n<li>The risk is capped by the premium paid (as the price can never go lower than zero).<\/li>\r\n<\/ul>\r\n<p><img decoding=\"async\" class=\"aligncenter wp-image-72552 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/2.1.png\" alt=\"ITM Call option Payoff\" width=\"789\" height=\"442\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/2.1.png 789w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/2.1-300x168.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/2.1-768x430.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/2.1-50x28.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/2.1-100x56.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/2.1-150x84.png 150w\" sizes=\"(max-width: 789px) 100vw, 789px\" \/><\/p>\r\n<p>Imagine you purchase an ITM (In-The-Money) call option with:<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Strike Price<\/b><\/strong>: \u20b9100<\/li>\r\n<li><b><\/b><strong><b>Premium Paid<\/b><\/strong>: \u20b910<\/li>\r\n<\/ul>\r\n<p>Here\u2019s how it plays out at different stock prices at expiry:<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>If the stock price is \u20b990<\/b><\/strong>, you incur a loss of \u20b910 (you can&#8217;t exercise the option, so you only lose the premium).<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9110<\/b><\/strong>, you break even. Your profit from the option is \u20b910 (\u20b9110 &#8211; \u20b9100), which offsets the \u20b910 premium paid.<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9150<\/b><\/strong>, you make a profit of \u20b940. Here\u2019s how: \u20b9150 (stock price) &#8211; \u20b9100 (strike price) &#8211; \u20b910 (premium paid) = \u20b940.<\/li>\r\n<\/ul>\r\n<p>This aligns with the graph&#8217;s key characteristics:<\/p>\r\n<ol>\r\n<li>The graph starts below zero to reflect the premium paid.<\/li>\r\n<li>It flattens until the stock price equals the strike price (no intrinsic value below this point).<\/li>\r\n<li>After crossing the strike price, it rises steeply, showing increasing profits as the stock price climbs.<\/li>\r\n<\/ol>\r\n<h3><b><\/b><strong><b>OTM Call Option<\/b><\/strong>:<\/h3>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72554 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM.png\" alt=\"OTM call option payoff\" width=\"789\" height=\"442\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM.png 789w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-300x168.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-768x430.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-50x28.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-100x56.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-150x84.png 150w\" sizes=\"(max-width: 789px) 100vw, 789px\" \/><\/p>\r\n<ul>\r\n<li>The graph starts at zero, and only increases as the underlying price exceeds the strike price.<\/li>\r\n<li>The risk of loss increases as the price doesn\u2019t move in favor of the option (as it can lose all the premium paid).<\/li>\r\n<\/ul>\r\n<p>Suppose you buy an OTM call option with:<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Strike Price<\/b><\/strong>: \u20b9150<\/li>\r\n<li><b><\/b><strong><b>Premium Paid<\/b><\/strong>: \u20b910<\/li>\r\n<\/ul>\r\n<p>Here\u2019s what happens at different stock prices on expiry:<\/p>\r\n<ol>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9140<\/b><\/strong>, the option expires worthless because the stock price is below the strike price. You lose the entire premium of \u20b910.<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9150<\/b><\/strong>, you still incur a loss of \u20b910 (your premium) because the option doesn\u2019t yield any intrinsic value (the strike price equals the stock price).<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9170<\/b><\/strong>, you make a profit of \u20b910: \u20b9170 (stock price) &#8211; \u20b9150 (strike price) &#8211; \u20b910 (premium paid) = \u20b910.<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9200<\/b><\/strong>, your profit jumps to \u20b940: \u20b9200 (stock price) &#8211; \u20b9150 (strike price) &#8211; \u20b910 (premium paid) = \u20b940.<\/li>\r\n<\/ol>\r\n<p><strong><b>How It Relates to the Graph:<\/b><\/strong><\/p>\r\n<ul>\r\n<li>The graph starts at zero (at strike price \u20b9150) and rises steeply as the stock price exceeds the strike price, showing growing profits.<\/li>\r\n<li>The risk is limited to the premium paid (\u20b910), as the graph never dips below zero.<\/li>\r\n<\/ul>\r\n<h3><b><\/b><strong><b>ATM Call Option<\/b><\/strong>:<\/h3>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72555 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ATM.png\" alt=\"ATM call option payoff\" width=\"789\" height=\"442\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ATM.png 789w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ATM-300x168.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ATM-768x430.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ATM-50x28.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ATM-100x56.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ATM-150x84.png 150w\" sizes=\"(max-width: 789px) 100vw, 789px\" \/><\/p>\r\n<ul>\r\n<li>The graph starts at zero (no intrinsic value).<\/li>\r\n<li>It slopes upward as the underlying price moves higher, but also has time decay working against it (the value decreases over time).<\/li>\r\n<\/ul>\r\n<p>Let\u2019s look at an example of an <strong><b>At-The-Money (ATM) Call Option<\/b><\/strong>\u00a0to explain this graph.<\/p>\r\n<p>Suppose:<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Strike Price<\/b><\/strong>: \u20b9100<\/li>\r\n<li><b><\/b><strong><b>Premium Paid<\/b><\/strong>: \u20b910<\/li>\r\n<\/ul>\r\n<p><strong><b>Scenario on Expiry:<\/b><\/strong><\/p>\r\n<ol>\r\n<li><b><\/b><strong><b>If the stock price is \u20b990<\/b><\/strong>, the option expires worthless as it&#8217;s below the strike price. Your loss equals the premium paid (\u20b910).<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9100<\/b><\/strong>, the option is still worthless since the stock price equals the strike price. Loss = \u20b910 (premium paid).<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9120<\/b><\/strong>, the option becomes profitable: \u20b9120 (stock price) &#8211; \u20b9100 (strike price) &#8211; \u20b910 (premium paid) = \u20b910 profit.<\/li>\r\n<li><b><\/b><strong><b>If the stock price is \u20b9150<\/b><\/strong>, your profit increases further: \u20b9150 (stock price) &#8211; \u20b9100 (strike price) &#8211; \u20b910 (premium paid) = \u20b940 profit.<\/li>\r\n<\/ol>\r\n<p><strong><b>Time Decay (Theta Effect):<\/b><\/strong><\/p>\r\n<p>If the current stock price is near \u20b9100 (strike price) before expiry, the call option has time value. For example, even if the stock price is \u20b9100, the option might be worth \u20b95 due to the potential for future movement. However, as the expiration date approaches, the time value erodes, causing the option&#8217;s value to decrease unless the stock price moves significantly higher. This is called time decay.<\/p>\r\n<h4><strong><b>How It Matches the Graph:<\/b><\/strong><\/h4>\r\n<ul>\r\n<li>The graph starts at zero (no intrinsic value at the strike price of \u20b9100).<\/li>\r\n<li>It slopes upward as the stock price rises, showing increasing profit.<\/li>\r\n<li><b><\/b><strong><b>Time decay<\/b><\/strong>works against the option\u2019s value, especially when the stock price is close to the strike price.<\/li>\r\n<\/ul>\r\n<h3><b><\/b><strong><b>ITM Put Option<\/b><\/strong>:<\/h3>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72556 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-PUT-Options.png\" alt=\"ITM PUT Options\" width=\"789\" height=\"442\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-PUT-Options.png 789w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-PUT-Options-300x168.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-PUT-Options-768x430.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-PUT-Options-50x28.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-PUT-Options-100x56.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ITM-PUT-Options-150x84.png 150w\" sizes=\"(max-width: 789px) 100vw, 789px\" \/><\/p>\r\n<ul>\r\n<li>The graph starts above zero, showing intrinsic value as the underlying price is lower than the strike price.<\/li>\r\n<li>The value increases with a falling underlying price.<\/li>\r\n<\/ul>\r\n<p>Imagine you hold an ITM put option with a strike price of \u20b9100. This means you have the right to sell the underlying asset at \u20b9100, regardless of its market price. Now, consider the following scenarios:<\/p>\r\n<ol>\r\n<li><b><\/b><strong><b>Stock price at expiry: \u20b980<\/b><\/strong>You can sell the asset for \u20b9100 even though it&#8217;s only worth \u20b980 in the market, making a profit of \u20b920 per unit.<\/li>\r\n<li><b><\/b><strong><b>Stock price at expiry: \u20b960<\/b><\/strong>Selling at \u20b9100 while the market price is \u20b960 results in a profit of \u20b940 per unit. As the underlying price drops further, your profit continues to increase.<\/li>\r\n<li><b><\/b><strong><b>Stock price at expiry: \u20b9120<\/b><\/strong>Here, the asset is worth more in the market than the strike price. Therefore, you wouldn\u2019t exercise your option, resulting in a small loss\u2014approximately \u20b910 in this case.<\/li>\r\n<\/ol>\r\n<p>This payoff structure illustrates how the graph starts above zero (representing intrinsic value) and increases as the underlying price falls below the strike price<\/p>\r\n<h3><b><\/b><strong><b>O<\/b><\/strong><strong><b>TM Put Option<\/b><\/strong>:<\/h3>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72557 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-put-Options.png\" alt=\"OTM put Options\" width=\"789\" height=\"442\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-put-Options.png 789w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-put-Options-300x168.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-put-Options-768x430.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-put-Options-50x28.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-put-Options-100x56.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/OTM-put-Options-150x84.png 150w\" sizes=\"(max-width: 789px) 100vw, 789px\" \/><\/p>\r\n<ul>\r\n<li>The graph starts at zero and increases as the underlying price falls.<\/li>\r\n<li>The risk of loss increases as the underlying price doesn\u2019t fall below the strike price.<\/li>\r\n<\/ul>\r\n<p>\u20b9100 (strike price) &#8211; \u20b970 (stock price) &#8211; \u20b910 (premium paid) = \u20b920 profit per un<\/p>\r\n<p>An OTM put option payoff graph represents the outcome when the underlying price stays above the strike price initially, and profits rise as the price falls below the strike price. Here&#8217;s an example:<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Strike Price:<\/b><\/strong>\u20b9100<\/li>\r\n<li><b><\/b><strong><b>Put Option Premium:<\/b><\/strong>\u20b910<\/li>\r\n<\/ul>\r\n<p><b><\/b><strong><b>Scenario 1: <\/b><\/strong>Stock Price at Expiry = \u20b970 You have the right to sell the stock at \u20b9100, while it&#8217;s worth \u20b970 in the market. Your profit:<\/p>\r\n<p><strong><b>Scenario 2:<\/b><\/strong>\u00a0Stock Price at Expiry = \u20b990<\/p>\r\n<ul>\r\n<li>\u20b9100 &#8211; \u20b990 &#8211; \u20b910 = \u20b90. The premium paid matches the intrinsic value, resulting in no profit.<\/li>\r\n<\/ul>\r\n<p><strong><b>Scenario 3:<\/b><\/strong>\u00a0Stock Price at Expiry = \u20b9110 Here, the stock is worth more in the market than your strike price. You don&#8217;t exercise the option. Your loss is capped at \u20b910 (the premium paid).<\/p>\r\n<p>This aligns with the graph\u2014profit rises when prices fall below \u20b9100, and the loss (premium) stays fixed when prices stay above \u20b9100.<\/p>\r\n<h3><b><\/b><strong><b>ATM Put Option<\/b><\/strong>:<\/h3>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72558 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/atm-put-1.png\" alt=\"Atm put options\" width=\"789\" height=\"442\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/atm-put-1.png 789w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/atm-put-1-300x168.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/atm-put-1-768x430.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/atm-put-1-50x28.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/atm-put-1-100x56.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/atm-put-1-150x84.png 150w\" sizes=\"(max-width: 789px) 100vw, 789px\" \/><\/p>\r\n<ul>\r\n<li>The graph starts at zero (no intrinsic value).<\/li>\r\n<li>It increases as the underlying price moves lower, with similar time decay effects.<\/li>\r\n<\/ul>\r\n<p>Example of ATM (At-the-Money) Put Option, where the strike price is \u20b9100 and the premium paid for the option is \u20b910:<\/p>\r\n<p><strong><b>Examples:<\/b><\/strong><\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Stock price at expiry: \u20b980<\/b><\/strong>You exercise the put option to sell at \u20b9100 while the stock is worth \u20b980 in the market.<\/li>\r\n<li><strong><b>Payoff calculation:<\/b><\/strong> \u20b9100 (strike price) &#8211; \u20b980 (stock price) = \u20b920 After deductng the premium: \u20b920 &#8211; \u20b910 = \u20b910 profit.<\/li>\r\n<li><b><\/b><strong><b>Stock price at expiry: \u20b9100<\/b><\/strong>Since the stock price is equal to the strike price, there&#8217;s no intrinsic value.<\/li>\r\n<li><strong><b>Payoff calculation:<\/b><\/strong>\u00a0\u20b9100 &#8211; \u20b9100 = \u20b90 After deducting the premium: \u20b90 &#8211; \u20b910 = \u20b910 loss.<\/li>\r\n<\/ul>\r\n<p><b><\/b><strong><b>Stock price at expiry: \u20b9120<\/b><\/strong><\/p>\r\n<p>The stock price is higher than the strike price, so the option is not exercised, resulting in a loss.\u00a0Payoff calculation:\u00a0\u20b90 &#8211; \u20b910 = \u20b910 loss.<\/p>\r\n<p>This aligns with the graph: the payoff starts at zero when the stock price equals the strike price (\u20b9100). As the stock price falls below \u20b9100, the payoff rises, offsetting the premium paid. Losses, however, are capped at the premium when the stock price stays above the strike price.<\/p>\r\n<h3><strong><b>Summary of Risk Profiles:<\/b><\/strong><\/h3>\r\n<ul>\r\n<li><b><\/b><strong><b>ITM Options<\/b><\/strong>: Lower risk, as there is intrinsic value. Profit increases with favorable movement in the underlying.<\/li>\r\n<li><b><\/b><strong><b>OTM Options<\/b><\/strong>: Higher risk, as they have no intrinsic value and are entirely dependent on the price moving significantly in the favorable direction.<\/li>\r\n<li><b><\/b><strong><b>ATM Options<\/b><\/strong>: Moderate risk, as they are dependent on the underlying price moving significantly and are subject to time decay.<\/li>\r\n<\/ul><\/div>\n<div id='text_slider_slide03' class='sa_hover_container' data-hash='Option-Seller-Risk-Profile\u2013Short-Calls-and-Puts' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; '><h2><strong><b>2.3 Option Seller Risk Profile \u2013 Short Calls \u00a0and Puts<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72946 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Seller-Risk-Profile-\u2013-Short-Calls-and-Puts.png\" alt=\"Option Seller Risk Profile \u2013 Short Calls \u00a0and Puts\" width=\"882\" height=\"667\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Seller-Risk-Profile-\u2013-Short-Calls-and-Puts.png 882w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Seller-Risk-Profile-\u2013-Short-Calls-and-Puts-300x227.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Seller-Risk-Profile-\u2013-Short-Calls-and-Puts-768x581.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Seller-Risk-Profile-\u2013-Short-Calls-and-Puts-50x38.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Seller-Risk-Profile-\u2013-Short-Calls-and-Puts-100x76.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Seller-Risk-Profile-\u2013-Short-Calls-and-Puts-150x113.png 150w\" sizes=\"(max-width: 882px) 100vw, 882px\" \/><\/p>\r\n<table style=\"height: 282px\" width=\"1218\">\r\n<tbody>\r\n<tr>\r\n<td width=\"272\">\r\n<p><strong><b>Option Type<\/b><\/strong><\/p>\r\n<\/td>\r\n<td width=\"234\">\r\n<p><strong><b>\u00a0Max Profit<\/b><\/strong><\/p>\r\n<\/td>\r\n<td width=\"218\">\r\n<p><strong><b>\u00a0Max Loss<\/b><\/strong><\/p>\r\n<\/td>\r\n<td width=\"339\">\r\n<p><strong><b>Ideal Market<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Buy Call \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/p>\r\n<\/td>\r\n<td>\r\n<p>Unlimited<\/p>\r\n<\/td>\r\n<td>\r\n<p>Premium<\/p>\r\n<\/td>\r\n<td>\r\n<p>Bullish<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Sell Call<\/p>\r\n<\/td>\r\n<td>\r\n<p>Premium<\/p>\r\n<\/td>\r\n<td>\r\n<p>Unlimited<\/p>\r\n<\/td>\r\n<td>\r\n<p>Bearish\/Neutral<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Buy Put<\/p>\r\n<\/td>\r\n<td>\r\n<p>High (if price drops)<\/p>\r\n<\/td>\r\n<td>\r\n<p>Premium<\/p>\r\n<\/td>\r\n<td>\r\n<p>Bearish<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Sell \u00a0Put<\/p>\r\n<\/td>\r\n<td>\r\n<p>Premium<\/p>\r\n<\/td>\r\n<td>\r\n<p>High (if price falls)<\/p>\r\n<\/td>\r\n<td>\r\n<p>Bullish\/ Neutral<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p>&nbsp;<\/p>\r\n<h2><strong><b>1. <\/b><\/strong><strong><b>Selling a Call Option (Short Call)<\/b><\/strong><\/h2>\r\n<p><strong><b>Maximum Profit:<\/b><\/strong>\u00a0Limited to the premium received.<br \/><strong><b>Maximum Loss:<\/b><\/strong>\u00a0Unlimited (if the stock price rises significantly).<br \/><strong><b>Break-even Point:<\/b><\/strong>\u00a0Strike Price + Premium Received.<\/p>\r\n<h3><strong><b>Risk Analysis<\/b><\/strong><\/h3>\r\n<ul>\r\n<li>The seller of a call option is obligated to sell the asset at the strike price if the buyer exercises the option.<\/li>\r\n<li>If the stock price stays belowthe strike price, the option expires worthless, and the seller keeps the premium as profit.<\/li>\r\n<li>If the stock price rises abovethe strike price, the seller must buy the stock at the market price and sell it at the strike price, leading to unlimited losses\u00a0as the stock price can theoretically rise indefinitely.<\/li>\r\n<li>This strategy is very risky, especially if the stock price moves sharply upwards.<\/li>\r\n<\/ul>\r\n<h3><strong><b>Example of Short Call Risk<\/b><\/strong><\/h3>\r\n<ul>\r\n<li>Strike Price: \u20b9100<\/li>\r\n<li>Premium Received: \u20b95<\/li>\r\n<li>If the stock closes at \u20b995, the option expires worthless, and the seller keeps the \u20b95 premium.<\/li>\r\n<li>If the stock closes at \u20b9120, the seller has to sell at \u20b9100 but buy at \u20b9120, leading to a loss of \u20b915 per share (\u20b920 loss &#8211; \u20b95 premium).<\/li>\r\n<li>If the stock jumps to \u20b9200, the seller faces a massive loss of \u20b995 per share.<\/li>\r\n<\/ul>\r\n<h3><strong><b>Who Uses This Strategy?<\/b><\/strong><\/h3>\r\n<ul>\r\n<li>Traders who believe that the stock price won&#8217;t rise significantly.<\/li>\r\n<li>Investors who own the stock and write covered calls to generate extra income (covered call strategy).<\/li>\r\n<\/ul>\r\n<h2><strong><b>2. Selling a Put Option (Short Put)<\/b><\/strong><\/h2>\r\n<p><strong><b>Maximum Profit:<\/b><\/strong>\u00a0Limited to the premium received.<\/p>\r\n<p><strong><b>Maximum Loss:<\/b><\/strong>\u00a0Significant but <strong><b>limited<\/b><\/strong>\u00a0(if the stock price falls to zero).<br \/><strong><b>Break-even Point:<\/b><\/strong>\u00a0Strike Price &#8211; Premium Received.<\/p>\r\n<h3><strong><b>Risk Analysis<\/b><\/strong><\/h3>\r\n<ul>\r\n<li>The seller of a put option is obligated to buythe asset at the strike price if the buyer exercises the option.<\/li>\r\n<li>If the stock price stays abovethe strike price, the option expires worthless, and the seller keeps the premium as profit.<\/li>\r\n<li>If the stock price drops significantly, the seller must buy the stock at the strike price, which can lead to substantial lossesif the stock collapses.<\/li>\r\n<li>The maximum loss occurs when the stock price falls to zero, meaning the seller must buy a worthless stock at the strike price.<\/li>\r\n<\/ul>\r\n<h3><strong><b>Example of Short Put Risk<\/b><\/strong><\/h3>\r\n<ul>\r\n<li>Strike Price: \u20b9100<\/li>\r\n<li>Premium Received: \u20b95<\/li>\r\n<li>If the stock closes at \u20b9105, the option expires worthless, and the seller keeps the \u20b95 premium.<\/li>\r\n<li>If the stock closes at \u20b980, the seller must buy at \u20b9100, leading to a loss of \u20b915 per share (\u20b920 loss &#8211; \u20b95 premium).<\/li>\r\n<li>If the stock drops to \u20b920, the seller faces a loss of \u20b975 per share.<\/li>\r\n<li>If the company goes bankrupt (\u20b90 stock price), the seller suffers a maximum loss of \u20b995 per share.<\/li>\r\n<\/ul>\r\n<h3><strong><b>Who Uses This Strategy?<\/b><\/strong><\/h3>\r\n<ul>\r\n<li>Traders who believe that the stock price won\u2019t fall significantly.<\/li>\r\n<li>Investors who want to buy a stock at a lower price(cash-secured put strategy).<\/li>\r\n<\/ul>\r\n<h2><strong><b>Key Takeaways<\/b><\/strong><\/h2>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td>\r\n<p><strong><b>Option Type<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Maximum Profit<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Maximum Loss<\/b><\/strong><\/p>\r\n<\/td>\r\n<td width=\"515\">\r\n<p><strong><b>Ideal Market Condition<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Short Call<\/p>\r\n<\/td>\r\n<td>\r\n<p>Limited to premium<\/p>\r\n<\/td>\r\n<td>\r\n<p>Unlimited<\/p>\r\n<\/td>\r\n<td width=\"515\">\r\n<p>Bearish or Neutral<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p>Short Put<\/p>\r\n<\/td>\r\n<td>\r\n<p>Limited to premium<\/p>\r\n<\/td>\r\n<td>\r\n<p>Significant (Stock Price \u2192 0)<\/p>\r\n<\/td>\r\n<td width=\"515\">\r\n<p>Bullish or Neutral<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p><strong><b>\u00a0<\/b><\/strong><\/p>\r\n<p><strong><b>\u00a0<\/b><\/strong><\/p>\r\n<p><strong><b>\u00a0<\/b><\/strong><\/p>\r\n<p><strong><b>\u00a0<\/b><\/strong><\/p><\/div>\n<div id='text_slider_slide04' class='sa_hover_container' data-hash='Real-Life-Example-of-Buying-a-Put-Option-for-Hedging' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; '><h2><strong><b>2.4 <\/b><\/strong><strong><b>Real-Life Example of Buying a Put Option \u00a0for Hedging<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72947 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Real-Life-Example-of-Buying-a-Put-Option-for-Hedging.png\" alt=\"Real-Life Example of Buying a Put Option \u00a0for Hedging\" width=\"894\" height=\"658\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Real-Life-Example-of-Buying-a-Put-Option-for-Hedging.png 894w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Real-Life-Example-of-Buying-a-Put-Option-for-Hedging-300x221.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Real-Life-Example-of-Buying-a-Put-Option-for-Hedging-768x565.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Real-Life-Example-of-Buying-a-Put-Option-for-Hedging-50x37.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Real-Life-Example-of-Buying-a-Put-Option-for-Hedging-100x74.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Real-Life-Example-of-Buying-a-Put-Option-for-Hedging-150x110.png 150w\" sizes=\"(max-width: 894px) 100vw, 894px\" \/><\/p>\r\n<p>&nbsp;<\/p>\r\n<h2><strong><b> <img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72559 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ravi-put-option.png\" alt=\"ravi put option\" width=\"789\" height=\"479\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ravi-put-option.png 789w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ravi-put-option-300x182.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ravi-put-option-768x466.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ravi-put-option-50x30.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ravi-put-option-100x61.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/ravi-put-option-150x91.png 150w\" sizes=\"(max-width: 789px) 100vw, 789px\" \/><\/b><\/strong><\/h2>\r\n<p><strong><b>\u00a0<\/b><\/strong><\/p>\r\n<p>Imagine Ravi is\u00a0an investor holding shares of Reliance Industries, currently trading at \u20b92,500 per share. Ravi is concerned about a potential drop in the stock price due to market volatility. To protect his investment, he\u00a0decided\u00a0to buy a put option with a strike price of \u20b92,400, expiring in one month. The premium for this option is \u20b950 per share.<\/p>\r\n<p><strong><b>Scenario 1: Stock price falls below \u20b92,400<\/b><\/strong>\u00a0If the stock price drops to \u20b92,300 before the option expires, Ravi\u00a0can exercise the put option and sell shares at \u20b92,400 instead of the lower market price of \u20b92,300. This minimizes his losses, as he\u00a0effectively locked in a selling price of \u20b92,400. After accounting for the \u20b950 premium, his \u00a0net selling price is \u20b92,350, which is still better than \u20b92,300.<\/p>\r\n<p><strong><b>Scenario 2: Stock price stays above \u20b92,400<\/b><\/strong>\u00a0If the stock price remains above \u20b92,400 (e.g., \u20b92,600), Ravi\u00a0wouldn&#8217;t exercise the put option, as he\u00a0can sell shares at the higher market price. In this case, the put option expires worthless, and his only loss is the \u20b950 premium he\u00a0paid.<\/p>\r\n<p>This example demonstrates how put options can act as a safety net for investors, helping them manage risks in a volatile market.<\/p><\/div>\n<div id='text_slider_slide05' class='sa_hover_container' data-hash='Put-Options-quotes-and-screens-on-a-Trading-platform' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; '><h2><strong><b>2.5 <\/b><\/strong><strong><b>Put Options quotes and screens on a Trading platform<\/b><\/strong><\/h2>\r\n<p>&nbsp;<\/p>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72948 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Understanding-Put-Options-Definition-Use-Cases-Profit-Scenarios-1.png\" alt=\"Understanding Put Options Definition, Use Cases, Profit Scenarios\" width=\"796\" height=\"864\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Understanding-Put-Options-Definition-Use-Cases-Profit-Scenarios-1.png 796w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Understanding-Put-Options-Definition-Use-Cases-Profit-Scenarios-1-276x300.png 276w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Understanding-Put-Options-Definition-Use-Cases-Profit-Scenarios-1-768x834.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Understanding-Put-Options-Definition-Use-Cases-Profit-Scenarios-1-46x50.png 46w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Understanding-Put-Options-Definition-Use-Cases-Profit-Scenarios-1-92x100.png 92w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Understanding-Put-Options-Definition-Use-Cases-Profit-Scenarios-1-150x163.png 150w\" sizes=\"(max-width: 796px) 100vw, 796px\" \/><\/p>\r\n<p>&nbsp;<\/p>\r\n<p>Put options quotes and screens are typically displayed on trading platforms through an options chain. This chain provides detailed information about various strike prices, expiration dates, and premiums for both call and put options.<\/p>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72560 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/SCREENSHOT.png\" alt=\"Option Chain Screenshot\" width=\"396\" height=\"449\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/SCREENSHOT.png 396w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/SCREENSHOT-265x300.png 265w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/SCREENSHOT-44x50.png 44w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/SCREENSHOT-88x100.png 88w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/SCREENSHOT-150x170.png 150w\" sizes=\"(max-width: 396px) 100vw, 396px\" \/><\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Options Chain<\/b><\/strong>: The chain shows strike prices in the middle column, with bid and ask prices for calls and puts on either side. You can select specific strike prices to view detailed quotes.<\/li>\r\n<\/ul>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72561 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Untitled-4.png\" alt=\"Options Chain\" width=\"720\" height=\"320\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Untitled-4.png 720w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Untitled-4-300x133.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Untitled-4-50x22.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Untitled-4-100x44.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Untitled-4-150x67.png 150w\" sizes=\"(max-width: 720px) 100vw, 720px\" \/><\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Expiry Dates<\/b><\/strong>: Platforms allow you to toggle between different expiration dates, such as near-term or long-term options.<\/li>\r\n<li><b><\/b><strong><b>Market Data<\/b><\/strong>: Real-time streaming quotes for the underlying asset and options are available if you subscribe to market data add-ons.<\/li>\r\n<li><b><\/b><strong><b>Customizable Screens<\/b><\/strong>: Many platforms let you add or remove data columns, set up alerts, and group positions for better analysis<\/li>\r\n<\/ul><\/div>\n<div id='text_slider_slide06' class='sa_hover_container' data-hash='Option-Chain-Parameters-for-Put-Options' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; '><h2><strong><b>2.6 <\/b><\/strong><strong><b>Option Chain Parameters for Put Options<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72949 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Chain-Parameters-for-Put-Options.png\" alt=\"Option Chain Parameters for Put Options\" width=\"948\" height=\"809\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Chain-Parameters-for-Put-Options.png 948w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Chain-Parameters-for-Put-Options-300x256.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Chain-Parameters-for-Put-Options-768x655.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Chain-Parameters-for-Put-Options-50x43.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Chain-Parameters-for-Put-Options-100x85.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Option-Chain-Parameters-for-Put-Options-150x128.png 150w\" sizes=\"(max-width: 948px) 100vw, 948px\" \/><\/p>\r\n<h3>1. <strong><b>Strike Price<\/b><\/strong><\/h3>\r\n<p>The strike price is the predetermined price at which the holder of a put option can sell the underlying asset. It forms the backbone of the option chain. For instance, in the option chain for Reliance Industries, strike prices might range from \u20b92,300 to \u20b92,700 in intervals (e.g., \u20b92,300, \u20b92,350, \u20b92,400, and so on). Each strike price has unique associated data like premium, open interest, etc.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If Reliance Industries is trading at \u20b92,500, you might choose a strike price of \u20b92,400 to hedge against a possible price drop.<\/p>\r\n<h3>2. <strong><b>Premium (Last Traded Price &#8211; LTP)<\/b><\/strong><\/h3>\r\n<p>The premium is the cost of purchasing the put option, calculated per share. It reflects the current value of the option based on factors like market sentiment, time to expiration, and implied volatility.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If the premium for a \u20b92,400 strike price put option is \u20b950, you would pay \u20b950 per share to secure the right to sell at \u20b92,400.<\/p>\r\n<h3>3. <strong><b>Open Interest (OI)<\/b><\/strong><\/h3>\r\n<p>Open interest is the total number of contracts that are currently active for a particular strike price. It indicates market activity and liquidity for that option.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If there are 5,000 contracts with the \u20b92,400 strike price, this is the open interest. Higher open interest suggests significant market interest in this option.<\/p>\r\n<h3>4. <strong><b>Change in Open Interest <\/b><\/strong><\/h3>\r\n<p>This shows the difference in open interest from the previous trading session. A positive change indicates more contracts have been opened, signaling increased market activity.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If the open interest for the \u20b92,400 strike price put option increases from 5,000 to 5,500, the change in open interest is +500 contracts.<\/p>\r\n<h3>5. <strong><b>Volume<\/b><\/strong><\/h3>\r\n<p>Volume is the number of option contracts traded during the current trading session. Higher volume can indicate active trading and greater interest in that strike price.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If 2,000 contracts of the \u20b92,400 strike price put option were traded today, that\u2019s the volume.<\/p>\r\n<h3>6. <strong><b>Implied Volatility (IV)<\/b><\/strong><\/h3>\r\n<p>Implied volatility measures the market\u2019s expectation of future price fluctuations for the underlying asset. Options with higher IVs tend to have higher premiums.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If the IV of a \u20b92,400 strike price put option is 30%, this indicates higher market uncertainty and results in a higher premium compared to an option with lower IV.<\/p>\r\n<h3>7. <strong><b>Bid Price and Ask Price<\/b><\/strong><\/h3>\r\n<p>These represent the price range at which buyers and sellers are willing to transact. The bid price is the highest price a buyer is willing to pay, while the ask price is the lowest price a seller is willing to accept.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0For a \u20b92,400 strike price put option:<\/p>\r\n<ul>\r\n<li>Bid price: \u20b948<\/li>\r\n<li>Ask price: \u20b952<\/li>\r\n<\/ul>\r\n<p>This means buyers are ready to pay \u20b948, while sellers want \u20b952.<\/p>\r\n<h3>8. <strong><b>Net Change<\/b><\/strong><\/h3>\r\n<p>This reflects the change in the option\u2019s premium compared to the previous day\u2019s closing price.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If the premium for the \u20b92,400 strike price put option increased from \u20b950 to \u20b955 today, the net change is +\u20b95.<\/p>\r\n<h3>9. <strong><b>ITM, ATM, and OTM (Intrinsic Value)<\/b><\/strong><\/h3>\r\n<p>These terms classify options based on the relationship between the strike price and the current price of the underlying asset:<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>In-the-Money (ITM)<\/b><\/strong>: Strike price is below the current market price of the underlying asset. The put option has intrinsic value.<\/li>\r\n<li><b><\/b><strong><b>At-the-Money (ATM)<\/b><\/strong>: Strike price is equal to the current market price. The option has no intrinsic value, but time value remains.<\/li>\r\n<li><b><\/b><strong><b>Out-of-the-Money (OTM)<\/b><\/strong>: Strike price is above the current market price. The option has no intrinsic value.<\/li>\r\n<\/ul>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If Reliance Industries is trading at \u20b92,500:<\/p>\r\n<ul>\r\n<li>\u20b92,400 strike price: <strong><b>ITM<\/b><\/strong><\/li>\r\n<li>\u20b92,500 strike price: <strong><b>ATM<\/b><\/strong><\/li>\r\n<li>\u20b92,600 strike price: <strong><b>OTM<\/b><\/strong><\/li>\r\n<\/ul><\/div>\n<div id='text_slider_slide07' class='sa_hover_container' data-hash='Using-Put-Options-spreads-to-limit-risk' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; '><h2><strong><b>2.7 Using Put Options spreads to limit risk<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-72950 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Using-Put-Options-spreads-to-limit-risk.png\" alt=\"Using Put Options spreads to limit risk\" width=\"657\" height=\"657\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Using-Put-Options-spreads-to-limit-risk.png 657w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Using-Put-Options-spreads-to-limit-risk-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Using-Put-Options-spreads-to-limit-risk-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Using-Put-Options-spreads-to-limit-risk-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Using-Put-Options-spreads-to-limit-risk-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2025\/05\/Using-Put-Options-spreads-to-limit-risk-96x96.png 96w\" sizes=\"(max-width: 657px) 100vw, 657px\" \/><\/p>\r\n<p>Put option spreads are a strategic way to limit risk while managing costs in options trading. Here are some common types of put spreads and how they work:<\/p>\r\n<h3><strong><b>1. <\/b><\/strong><strong><b>Bear Put Spread<\/b><\/strong><\/h3>\r\n<ul>\r\n<li><b><\/b><strong><b>How it works<\/b><\/strong><strong><b>:<\/b><\/strong>This strategy involves buying a put option at a higher strike price and selling another put option at a lower strike price on the same underlying asset and expiration date.<\/li>\r\n<li><b><\/b><strong><b>Purpose<\/b><\/strong><strong><b>: <\/b><\/strong>It limits potential losses while reducing the cost of the trade.<\/li>\r\n<li><b><\/b><strong><b>Example<\/b><\/strong><strong><b>:<\/b><\/strong>Suppose a stock is trading at \u20b91,000. You buy a put option with a strike price of \u20b91,050 (premium \u20b950) and sell a put option with a strike price of \u20b9950 (premium \u20b920). Your net cost is \u20b930, and your maximum profit is \u20b970 if the stock price falls below \u20b9950.<\/li>\r\n<\/ul>\r\n<h3><strong><b>2. <\/b><\/strong><strong><b>Bull Put Spread<\/b><\/strong><\/h3>\r\n<ul>\r\n<li><b><\/b><strong><b>How it works<\/b><\/strong><strong><b>:<\/b><\/strong>This strategy involves selling a put option at a higher strike price and buying another put option at a lower strike price.<\/li>\r\n<li><b><\/b><strong><b>Purpose<\/b><\/strong><strong><b>: <\/b><\/strong>It generates income while limiting downside risk.<\/li>\r\n<li><b><\/b><strong><b>Example<\/b><\/strong><strong><b>: <\/b><\/strong>Suppose a stock is trading at \u20b91,000. You sell a put option with a strike price of \u20b9950 (premium \u20b920) and buy a put option with a strike price of \u20b9900 (premium \u20b910). Your net credit is \u20b910, and your maximum loss is \u20b940 if the stock price falls below \u20b9900.<\/li>\r\n<\/ul>\r\n<h3><strong><b>3. <\/b><\/strong><strong><b>Protective Put Spread<\/b><\/strong><\/h3>\r\n<ul>\r\n<li><b><\/b><strong><b>How it works<\/b><\/strong><strong><b>:<\/b><\/strong>This strategy involves buying a put option to protect an existing stock position and selling another put option at a lower strike price to offset the cost.<\/li>\r\n<li><b><\/b><strong><b>Purpose<\/b><\/strong><strong><b>: <\/b><\/strong>It provides downside protection while reducing the cost of the hedge.<\/li>\r\n<li><b><\/b><strong><b>Example<\/b><\/strong><strong><b>:<\/b><\/strong>If you own shares of a stock trading at \u20b91,000, you buy a put option with a strike price of \u20b9950 (premium \u20b950) and sell a put option with a strike price of \u20b9900 (premium \u20b920). Your net cost is \u20b930, and you\u2019re protected against losses below \u20b9950.<\/li>\r\n<\/ul><\/div>\n<\/div>\n<\/div>\n<script type='text\/javascript'>\n\tjQuery(document).ready(function() {\n\t\tjQuery('#text_slider').owlCarousel({\n\t\t\titems : 1,\n\t\t\tsmartSpeed : 400,\n\t\t\tautoplay : false,\n\t\t\tautoplayHoverPause : false,\n\t\t\tsmartSpeed : 400,\n\t\t\tfluidSpeed : 400,\n\t\t\tautoplaySpeed : 400,\n\t\t\tnavSpeed : 400,\n\t\t\tdotsSpeed : 400,\n\t\t\tdotsEach : 1,\n\t\t\tloop : false,\n\t\t\tnav : true,\n\t\t\tnavText : ['Previous','Next'],\n\t\t\tdots : true,\n\t\t\tresponsiveRefreshRate : 200,\n\t\t\tslideBy : 1,\n\t\t\tmergeFit : true,\n\t\t\tautoHeight : true,\n\t\t\tmouseDrag : false,\n\t\t\ttouchDrag : true\n\t\t});\n\t\tjQuery('#text_slider').css('visibility', 'visible');\n\t\tvar owl_goto = jQuery('#text_slider');\n\t\tjQuery('.text_slider_goto1').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 0);\n\t\t});\n\t\tjQuery('.text_slider_goto2').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 1);\n\t\t});\n\t\tjQuery('.text_slider_goto3').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 2);\n\t\t});\n\t\tjQuery('.text_slider_goto4').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 3);\n\t\t});\n\t\tjQuery('.text_slider_goto5').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 4);\n\t\t});\n\t\tjQuery('.text_slider_goto6').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 5);\n\t\t});\n\t\tjQuery('.text_slider_goto7').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 6);\n\t\t});\n\t\tvar resize_72543 = jQuery('.owl-carousel');\n\t\tresize_72543.on('initialized.owl.carousel', function(e) {\n\t\t\tif (typeof(Event) === 'function') {\n\t\t\t\twindow.dispatchEvent(new Event('resize'));\n\t\t\t} else {\n\t\t\t\tvar evt = window.document.createEvent('UIEvents');\n\t\t\t\tevt.initUIEvent('resize', true, false, window, 0);\n\t\t\t\twindow.dispatchEvent(evt);\n\t\t\t}\n\t\t});\n\t});\n<\/script>\n<\/td><\/tr><\/tbody><\/table><iframe title=\"YouTube video player\" src=\"https:\/\/www.youtube.com\/embed\/-qyxvx9gfbs?rel=0\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/div>                    <\/div>\n\t\t                    <\/div>\n        <\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Study Slides Videos 2.1 What Are ITM, ATM, and OTM Options? Definitions and Examples In the Money (ITM): Call Option:A call option is \u201cin the money\u201d when the strike price is below\u00a0the current market price of the underlying asset. This means exercising the option would allow the buyer to purchase the asset at a lower &#8230; <a title=\"Options Risk Graphs\u2013 ITM, ATM, OTM-Chapter 2\" class=\"read-more\" href=\"https:\/\/www.5paisa.com\/finschool\/course\/complete-guide-to-options-buying-and-selling\/options-risk-graphs-itm-atm-otm-chapter-2\/\" aria-label=\"Read more about Options Risk Graphs\u2013 ITM, ATM, OTM-Chapter 2\">Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":11245,"parent":73020,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[],"class_list":["post-73032","markets","type-markets","status-publish","format-standard","has-post-thumbnail","hentry"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/markets\/73032","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/markets"}],"about":[{"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/types\/markets"}],"author":[{"embeddable":true,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/comments?post=73032"}],"version-history":[{"count":7,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/markets\/73032\/revisions"}],"predecessor-version":[{"id":73050,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/markets\/73032\/revisions\/73050"}],"up":[{"embeddable":true,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/markets\/73020"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/media\/11245"}],"wp:attachment":[{"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/media?parent=73032"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/categories?post=73032"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}