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What are the different types of Options? What do CE & PE stand for?
There are two main types of options contracts: Call Options (CE) and Put Options (PE). Both give the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price (the strike price) on or before a specific date (the expiry date).
- Call Options (CE):
- What CE stands for: Call
- What it gives you: A Call option allows the buyer to purchase the underlying asset at the strike price on or before the expiry date.
- When to buy them: Traders usually buy Call options when they expect the price of the underlying asset to rise.
- Example: If you buy a Nifty 50 Call option with a strike price of 23,000, you have the right to buy Nifty 50 at 23,000, even if the market price goes higher.
- Put Options (PE):
- What PE stands for: Put
- What it gives you: A Put option allows the buyer to sell the underlying asset at the strike price on or before the expiry date.
- When to buy them: Traders usually buy Put options when they expect the price of the underlying asset to fall.
- Example: If you buy a Reliance Industries Put option with a strike price of 2,800, you have the right to sell Reliance Industries shares at 2,800, even if the market price falls lower.