Call Put Option is otherwise known as derivative options. Every derivative option consists of a CALL (CE/CA) and PUT (PE/PA). These options are of two types based on their exercise. The first one is from Europe and often called an European Options and the second being American options. Basic difference between both these is the time of exercise they undergo. In European type of option trading, the exercise has to be done only at the time of expiry whereas in American type of option trading, exercise can be done any time till expiry. In Indian market, though exchanges follow American trading style for both nifty and stock options, notations are CE and PE for nifty call put options and CA and PA for stock call put options.
Irrespective of index call put options or stock call put options, the expiry remains same, last thursday of the month before which the holding call put options are supposed to get exercised. At the end of expiry, if the trader failed to square off the position, exchange checks for the type of option moneyness, ITM (In the money), ATM (At the money) or OTM (Out the money). If the type of call option or put option left is of OUT, settlement will not take place but if the call option or put options left is of ITM or ATM, then settlement takes place at exchange price and brokerage is charged as per the terms.
Summary of Call Put Options:
- Options are of two types world wide, European and American style.
- In European call put options, exercise is only at the time of expiry
- In American type, exercise at any time till expiry.
- Indian stock markets follow American method of trading
- In Indian market, expiry at last Thursday of the month