Part 2 Master Candle Stick Pattern

Basic Terminology

To understand options properly, several terms must be clear:

1. Strike Price

The price at which the option buyer can buy or sell the underlying.

2. Premium

The price paid by the option buyer to the seller.
Buyers pay the premium; sellers receive it.

3. Expiry

All options have a time limit. On expiry day, the option settles based on the underlying price.

4. In-the-Money (ITM)

Options with intrinsic value.
Example: Call with strike below current price.

5. Out-of-the-Money (OTM)

Options with no intrinsic value, only time value.

6. At-the-Money (ATM)

Strike price is closest to the underlying price.

7. Lot Size

Options are not traded 1 unit at a time. Each contract has a predefined lot size (e.g., Nifty = 50 units).