Understanding call and put options is essential for anyone interested in exploring the world of stock trading and derivatives. These concepts allow investors to speculate on stock price movements or hedge against potential losses. Even if your primary goal is to learn how to buy Apple shares from India, knowing how calls and puts work can help you make more informed investment decisions.
What Are Call and Put Options?
In the share market, options are contracts that give you the right, but not the obligation, to buy or sell an underlying asset (like a stock) at a predetermined price before a specific date. These are of two main types — Call Options and Put Options.
A Call Option gives you the right to buy a stock at a set price (called the strike price). Investors buy call options when they believe the stock price will rise. Conversely, a Put Option gives you the right to sell a stock at a specific price, usually when you expect the stock’s value to fall.
Example: Understanding Call and Put
Suppose Apple shares are currently trading at $170. You buy a call option with a strike price of $180 that expires in a month. If Apple’s stock rises to $190 before expiry, your call option gains value because you can buy shares at $180 instead of $190.
On the other hand, if you buy a put option for Apple at a strike price of $170, and the price drops to $150, you can sell shares at $170 — higher than the market price — thus making a profit.
Why Are Calls and Puts Important?
Call and put options provide flexibility. They can be used for:
- Speculation: To profit from expected price movements.
- Hedging: To protect your portfolio from potential losses.
- Income Generation: Selling options to earn premiums.
While options trading offers high returns, it also carries higher risk compared to regular stock investing, especially for beginners.
How to Buy Apple Shares from India
If you prefer straightforward investing, you can buy Apple shares directly instead of trading options. Here’s how Indian investors can do it:
- Open an account with an international broker such as Groww, HDFC Securities Global, or Interactive Brokers that provides access to US markets.
- Complete KYC and LRS compliance under the RBI’s Liberalised Remittance Scheme (LRS), which allows you to invest up to $250,000 per year abroad.
- Fund your account in USD using your linked Indian bank account.
- Search for Apple (AAPL) on the platform and place a buy order for the desired number of shares.
Conclusion
Learning about call and put options helps investors understand market trends, manage risk, and diversify strategies. However, for most beginners, directly buying high-quality international stocks like Apple may be a simpler and safer way to start investing. As you grow comfortable, you can gradually explore the world of derivatives for more advanced trading opportunities.
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