Chapter 01 of 6 · 9 lessons · Concept, Lab, Case
Option basics
Where the series starts. Each lesson takes a claim about what an option is worth and checks it against contracts from a recorded session, because a settlement price either matches the definition or it does not.
An option is a contract granting a right without an obligation: to buy at a fixed price in the case of a call, or to sell at one in the case of a put. What the holder pays for that right is the premium, and it is the whole of their risk. The writer, who receives it, takes the matching obligation and a risk the contract does not bound.
Almost everything else follows from one piece of arithmetic. At expiry a contract is worth the distance between the closing level and its strike, or it is worth nothing; there is no third case. Every lesson here checks that against contracts that actually settled, because a settlement price either matches the definition or it does not. On 22 September 2026, nine of them matched it exactly.
The distinction that costs beginners most is not between calls and puts. It is between where a strike finished relative to the close and whether the position made money. A contract can end well inside the money and still return less than it cost, and this chapter separates those two questions before going further.
By the end of this chapter
- Read any option chain and say what each contract is worth right now
- Work out what a call or a put settles at before the market tells you
- Explain why an option can finish in the money and still lose money
- Say what you are committing to when you write an option rather than buy one
The lessons
In order, though each one stands on its own.
Common questions
Do I need to understand the Greeks before I start?
No. The Greeks describe how a price responds before expiry; what a contract settles at needs only the closing level and the strike. This chapter covers the second, and the Greeks chapter covers the first.
What is the maximum I can lose on an option?
As a buyer, the premium - it is paid on entry and nothing further can be called. As a writer, the loss beyond the breakeven is not bounded by the contract, which is why writing requires margin and buying does not.
Are Indian index options settled in cash?
Yes. NIFTY and SENSEX options settle against the closing level and no securities change hands. Options on individual stocks settle by delivery, which is a materially different obligation and is covered in the Mechanics chapter.
Written and maintained by MarketCue research
How these figures are produced
Every price on these pages was traded on the exchange and is read from our own option-chain capture, which records the NIFTY and SENSEX chains once a minute through the session. Each page names the session its figures come from.
Figures that a model produced rather than the market — the Greeks, implied volatility — are labelled as model outputs wherever they appear, and never presented beside traded prices without saying which is which. The pricing is checked against published reference values on every change.
Where our own data cannot support a claim, the page says so instead of generalising. MarketCue is not a registered investment adviser, research analyst or broker under SEBI regulations.