Basics About Options Part - II

In earlier post we had gone through basics of Options. Incase if you have missed that we request you to go through that first by clicking here 

Now let's take step forward in same direction. 

What is strike price...??? 

In simple terms strike price that price of underlying asset/index at which buyer and seller agreed to settle contract on or before expiry. 

Lets try to understand same via simple example. 

Assume if Mr X buys Nifty 10500 CE contract from Mr Y then it is understood that Mr X assumes Nifty will close above 10500 on or before expiry day (Generally last Thursday of calendar Month) whereas Mr Y expected opposite.

Lets try to take few more examples  

Underlying Asset: - Nifty

Let’s try to understand via Call Option

Type of Option	Strike Price	Close on day of expiry	Mr X (buyer) (Bullish view)	Mr Y (writer/seller) (Bearish to Neutral view)
CE	10000	10100	His view went correct	His view went wrong
CE	10200	10195	His view went wrong	His view went correct
CE	10500	10200	His view went wrong	His view went correct
CE	10300	10330	His view went correct	His view went wrong

Let’s try to understand via Put Option

Type of Option	Strike Price	Close on day of expiry	Mr X (buyer) (Bearish view)	Mr Y (writer/seller) (Bullish to Neutral view)
PE	10200	10250	His view went wrong	His view went correct
PE	10300	10275	His view went correct	His view went wrong
PE	10100	10500	His view went wrong	His view went correct
PE	10500	10300	His view went correct	His view went wrong

In our next post we shall try to understand what is
In the money
At the Money 
Out of the Money

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Please note this blog post is for education purpose only. While utmost care is taken while writing this post but any human error cant be ruled out and we apologize for same in advance.