You know the textbook line already. A call and put option gives you the right to buy or sell at a fixed price, with no obligation to follow through. Here is what that definition never tells you: what the contract does if you do nothing at all. In India, the expiry calendar and a tax rule decide that.
What Are Call and Put Options?
Puts and calls are the two option types traded in India’s derivatives market. Each is a contract between a buyer and a seller over an underlying asset, such as the Nifty 50 index or a listed stock.
The buyer pays a premium and receives a right. The seller, also called the writer, collects that premium and takes the matching obligation. Only one side has a choice.
That asymmetry is the whole design. Options sit alongside futures inside futures and options trading on the National Stock Exchange (NSE) and BSE. A futures contract commits both parties to act. An option does not.
What Is a Call Option?
A call option gives you the right to buy the underlying at a fixed strike price on expiry, and no obligation to do so.
The premium is what that right costs. If the underlying settles above your strike, the contract carries intrinsic value, meaning the gap between settlement price and strike. Settle at or below the strike and it expires worthless.
The call writer sits opposite you. They keep your premium when the option expires worthless, and carry an open-ended loss if the underlying runs far above the strike.
What Is a Put Option?
A put option gives you the right to sell the underlying at the strike price on expiry, again with no obligation.
You do not need to own the shares first. A put bought without the underlying is a directional bet on a fall. A put bought against shares you hold is protection for those shares.
Intrinsic value runs the other way here. The contract pays only when settlement finishes below the strike. A put writer’s loss is large but bounded, because the underlying can fall no further than zero.
How Do Call and Put Options Work?
The contract specification decides your outcome as much as the direction call does, and it is what most guides leave out.
Indian index options are European style. NSE labels them CE and PE, for Call European and Put European, which means no early exercise. You can sell the contract any trading day, but exercise happens only at expiry (NSE contract specifications, as on 23 September 2025).
Expiry falls on a Tuesday. Nifty 50 weekly contracts expire every Tuesday of the expiry week, monthly contracts on the last Tuesday of the month.
You trade in lots, never single units. The Nifty 50 lot size is 65 from the January 2026 series, cut from 75 under NSE circular FAOP70616. To trade any of it, first open a demat and trading account with derivatives activated.
Types of Call and Put Options
Every call put option listed on an exchange is classified on two axes. Most beginners learn only the first.
The first is moneyness. An option is In The Money (ITM) when exercising it would pay, and Out of The Money (OTM) when it would not. At The Money (ATM) means the strike sits at the current price. A call is ITM when spot is above the strike, a put when spot is below.
The second axis is the underlying, and it decides what lands in your account. Index options such as Nifty 50 are cash settled. Stock options are physically settled, so an ITM stock option carried to expiry becomes a delivery obligation in real shares.
Also Read: Learn more about the Types of Options and how different option classifications work.
Call Option vs Put Option: Key Differences
The put call comparison comes down to direction, to where the risk sits, and to what expiry does to each.
Attribute | Call option | Put option |
Buyer’s view | Underlying rises | Underlying falls |
Buyer’s right | Buy at the strike | Sell at the strike |
Writer’s obligation | Sell at the strike | Buy at the strike |
Buyer’s maximum loss | Premium paid | Premium paid |
Writer’s maximum loss | Open ended | Strike minus premium |
Left untouched at expiry | Cash or shares if ITM | Cash or delivery if ITM |
That last row is the one that costs people money. Expiry acts on the contract whether you are watching or not.
When Should You Buy Call and Put Options?
Direction alone is not a reason to buy. An entry needs three things to line up, and the third gets skipped most often.
You need a view on direction, a view on timing, and a premium cheap enough to still pay you when you are right. Premium erodes as expiry nears even when the underlying sits still, so a correct call made too early loses money anyway.
There is also a case for not buying. If you expect a stock to drift sideways, neither contract pays you for that view.
Real-Life Example of Trading Call and Put Options
Assume an illustrative Nifty 50 level of 25,000, used only to keep the arithmetic clean.
You buy one lot of the 25,000 call at ₹120, costing ₹7,800 at a lot size of 65. You separately buy one lot of the 25,000 put at ₹110, costing ₹7,150.
The index settles at 25,200 on the last Tuesday. The call finishes 200 points ITM, worth ₹13,000. The put expires worthless and the full ₹7,150 goes. Maximum loss for a buyer really is the premium.
Now the fork. Nifty 50 is an index, so both settle in cash. Had these been single-stock options, the ITM call would have devolved into delivery, needing the full contract value in your account.
Costs land on the exit either way. Brokerage at Indiabulls Securities is 2.5% or ₹11 per executed order, whichever is lower, across NSE (CM, FO, CD), BSE (CM, FO) and MCX. Securities Transaction Tax (STT) is 0.15% of premium when you sell an option, and 0.15% of intrinsic value on exercise, charged then to the purchaser (NSE, from 1 April 2026).
Advantages of Trading Call and Put Options
Defined risk is the real advantage for a buyer. Your loss is capped at the premium, known before you enter, and it does not grow.
Capital efficiency follows. A premium of ₹7,800 buys exposure to a contract worth several lakh rupees, and that same efficiency lets a modest adverse move erase the whole premium. Traders wanting leveraged cash-market exposure over weeks use the margin trading facility (mtf) instead, where gains and losses are amplified in the same proportion.
Options also let you express a fall without borrowing stock. That moves risk. It does not remove it.
Risks of Trading Call and Put Options
The base rate is not encouraging. A SEBI study published in July 2025 found 91% of individual traders in equity derivatives made a net loss in FY25. Aggregate net losses reached ₹1,05,603 crore after transaction costs.
Time decay drives much of that. Premium erodes daily toward expiry, so the move must arrive quickly as well as correctly.
Writing options inverts the risk. A call writer’s loss has no ceiling, and losses in derivatives can exceed the capital initially deployed.
Physical settlement ambushes beginners. An ITM stock option left open through expiry becomes a delivery obligation, met only with the full contract value or the shares themselves.
Tips for Beginners Before Trading Call and Put Options
Five checks remove most avoidable damage, and none asks you to predict anything.
- Confirm the expiry day before entering, because it is Tuesday, not Thursday.
- Confirm the current lot size before sizing, since NSE revises it periodically.
- Square off rather than letting an ITM contract run into exercise or delivery.
- Price the contract in an option chain first, so the premium is a decision.
- Size every position to a loss you can absorb, since premium can go to zero.
Start by buying rather than writing. A buyer’s worst case is knowable on day one. A writer’s is not.
Conclusion
Ask three questions before any option trade. Which direction, over what period, and at a premium that still pays you when you are right? If one answer is vague, the trade is a guess wearing the clothes of a strategy.
Then check the contract, not just the view. Expiry day, lot size and settlement type decide what reaches your account. The Option Chain and the Greeks Calculator from Indiabulls Securities let you test that arithmetic first.
