Part 2 Understanding the Structure of a Candlestick

Key Terminologies

To understand options deeply, it’s essential to know the following terms:

Strike Price: The fixed price at which the option holder can buy (call) or sell (put) the underlying.

Premium: The price paid by the option buyer to the seller.

Expiry Date: The date on which the option contract expires.

In-the-Money (ITM): A call option is ITM if the underlying price is above the strike price; a put option is ITM if the price is below the strike.

Out-of-the-Money (OTM): The opposite of ITM; when exercising the option would not be profitable.

At-the-Money (ATM): When the underlying price is equal (or close) to the strike price.

Intrinsic Value: The amount by which an option is in the money.

Time Value: The portion of the option’s premium that reflects the time left until expiry and market volatility.