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Sunday, Sep 22, 2002

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Options guide

Call option: A call option gives the buyer `the right but not the obligation' to buy the stock at a specified price on a future date.

Put Option: A put option gives the buyer `the right but not the obligation' to sell a stock at a given price on a future date.

Exercise: Options on individual stocks are American and hence can be exercised at any date before expiration. Index options are European and can be exercised only on the expiration date

Call/Put premium: The price paid by the buyer of a call option or a put option is termed as the call/put premium. The premium is a one time outflow for the buyer of options.

Expiration Date: Expiration date is the day on which the option contract matures. The rxpiration date in the case of options on both the NSE and BSE is fixed as the last Thursday of the respective month.

Strike: The strike price is the price at which an option can be exercised. For instance the Nifty 26th July 1020 strike call option means that the investor can exercise the call option on the Nifty on 26th July at a price of 1020.

High Price — The high price refers to the highest premium charged on an option for the entire week.

Low Price — The low price refers to the lowest premium charged on an option for the entire week.

Average Close — The average close represents the average premium calculated from the last traded price on all days for the trading week.

Spot Close — The spot close refers to the last traded price of the underlying in the cash market on the last trading day.

Aggregate Traded Quantity — Aggregate traded quantity refers to the total traded quantity for an option during the course of the week.

Average Notional Value — Average notional value refers to the average notional value of a contract traded during the course of the week.

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