What it means
A CE gains value when the price rises and a PE when it falls. European means the option can only be exercised on its expiry day, though it can be bought and sold at any time before then. All index and stock options in India are of this type.
Example
NIFTY 25000 CE is a call option on the Nifty 50 with a strike price of 25,000.
In practice
Every option on an Indian trading screen is named by its underlying, expiry, strike and type, such as NIFTY 25000 CE. Reading that name tells you everything about the contract: what it tracks, when it ends, at what price it pays off and in which direction.
A trader who expects a rise can buy a CE or sell a PE; one who expects a fall can buy a PE or sell a CE. Buying limits the loss to the premium paid, while selling collects the premium and takes on the larger risk.
What to watch for
Cheap options far from the current price look attractive because they cost little, but most of them expire worthless. Stock options that finish in the money are settled by delivering the actual shares, which needs far more money than the premium.
Related terms
4 terms- OptionA contract giving the right, but not the obligation, to buy (call) or sell (put) at a set price before a set date.
- Option chainA table of every available option on one asset for one expiry, with calls on one side, puts on the other and strike prices down the middle.
- F&OFutures and options: the derivatives segment of the Indian stock market, where contracts on indices and stocks trade in fixed lots.
- Expiry dayThe day a futures or options contract stops trading and is settled; after it, the contract no longer exists.