Part 4 Learn Institutional Trading

Option trading is a type of derivative trading where traders buy or sell the right (but not the obligation) to buy or sell an underlying asset—like stocks, indices, or commodities—at a specific price before a certain date.

Two Main Types of Options

Call Option: Gives the holder the right to buy the asset.

Put Option: Gives the holder the right to sell the asset.

Key Participants

There are two sides in an options trade:

Buyer (Holder): Pays a premium for the right to trade.

Seller (Writer): Receives the premium and has an obligation to fulfill the contract if exercised.