How to master in Option Learning.....

Introduction:

Nowadays, many investors' portfolios include investments such as Mutual fund, stocks and Bonds. But the variety of securities you have at your disposal does not end there. Another type of security, known as Options, presents a world of opportunity to sophisticated investors who understand both the practical uses and inherent risks associated with this asset class.

The power of options lies in their versatility, and their ability to interact with traditional assets such as individual stocks. They enable you to adapt or adjust your position according to many market situations that may arise. For example, options can be used as an effective Hedge against a declining stock market to limit downside losses. Options can be put to use for speculative purposes or to be exceedingly conservative, as you want. Using options is therefore best described as part of a larger strategy of investing.

Options belong to the larger group of securities known as Derivative. This word has come to be associated with excessive risk taking and having the ability crash economies. That perception, however, is broadly overblown. All “derivative” means is that its price is dependent on, or derived from the price of something else. Put this way, wine is a derivative of grapes; ketchup is a derivative of tomatoes. in the stock market individual share is underlying asset of particular stock option.

Types of participant involve in the market....

Speculator

Hedger
Arbitrator

options are contracts that grant the right, but not the obligation to buy or sell an underlying asset at a set price on or before a certain date.

Moreover options is two types,

CALL OPTION & PUT OPTION.....

Call option :  an option to buy assets at an agreed price on or before a particular date.

Put option  :    an option to sell assets at an agreed price on or before a particular date.

A call option is an agreement that gives an investor the right, but not the obligation, to buy a stock, bond, commodity or other instrument at a specified price within a specific time period.

A Put option is an agreement that gives an investor the right, but not the obligation, to sell a stock, bond, commodity or other instrument at a specified price within a specific time period.

REF: INVESTOPEDIA