The Four Wishes
Before any trade, you must be able to say in one sentence what you want the price to do. This lesson makes that automatic for the four single-leg positions.
Mission link: success criterion one, "for any position I can say what I want the price to do." This is the floor everything else stands on.
The idea, in two words
Every option position is described by two words, and each word answers one question.
Call or put answers: which direction is this contract about? A call is about upside. A put is about downside.
Long or short answers: which side am I on? Long means I bought it and hold a right. Short means I sold it and hold a promise.
Put the two together and you get a wish:
| Call | Put | |
|---|---|---|
| Long | I want up | I want down |
| Short | I want not up | I want not down |
The row you're likely to get wrong is the short row. Selling a call is not a bullish trade. It's a bet against the call, and a call loses when the price fails to rise. Selling a put is not bearish. It's a bet against the put, which loses when the price fails to fall. So a short put is mildly bullish, which surprises everyone once.
Four people at the counter
Reliance is at ₹2,500. Lot size 250.
A and B hold opposite ends of one contract. One of them will be wrong. Same for C and D.
The test that never fails
When the table won't come, ask: when does my option become worthless, and do I want that?
A ₹2,600 call is worthless if Reliance finishes at or below ₹2,600. If you bought it, that's your nightmare, so you want above ₹2,600. If you sold it, that's your payday, so you want at-or-below. Run that once and the side sorts itself out.
Why "at or below" and not just "below"? At exactly ₹2,600 the right to buy at ₹2,600 is worth nothing. The seller keeps the full ₹30. The strike itself belongs to the seller.
Now retrieve it
Don't scroll up. Answer from memory. Every option below is a plain statement; the formatting gives nothing away.
One thing to do before the next lesson
Open the NIFTY option chain on Dhan. Pick any strike. Say out loud the four wishes for that strike: what a buyer of the call wants, a seller of the call, a buyer of the put, a seller of the put. Do it for three strikes. It takes two minutes and it moves this from a page you read to a thing you know.
The base rate, from SEBI's 2024 study: 93% of individual F&O traders lost money over three years. Most of them could not have stated the four wishes cold. That's why this is lesson one and not a footnote.