Option Trading is full of confusions for people who are not from finance background. There are lots of terms which are hard to understand. Major two of them are CE and PE. First time when you start learning Option Trading. The question what strikes in everyone’s mind that What is CE and PE?
So in the article we will discuss CE and PE in Details with example to clear your confusion regarding these terms. So let’s start discussing what is CE and PE?
Table of Contents
What is CE and PE?
Let’s understand ce and pe one buy one including meaning, other important points and example of ce meaning in share market.
ce full form in share market
CE is short form of Call Option, However, The real full form is Call European . They are investment contracts that provide the option investor the right, but not the commitment, to purchase a stock, bond, product, or other asset or instrument at a defined cost within a certain time frame.
The basic asset is a share, bond, or commodity. When the value of the basic asset rises, the call buyer gains.
Call options on securities offer the investor the choice to acquire fix number of shares of a firm at a certain price (the strike price) before a particular date (the expiry date).
When To Buy Call Option?
Assume Reliance’s annual general meeting (AGM) is coming, and you expect a significant decision will be made at the meeting. Although the stock is currently trading at INR 1950, you believe that this news would push the price higher, possibly above INR 1950.
However, you are wary of buying Reliance in the cash segment because it is too risky, and you would rather not buy it in the futures market because futures expose you to a limitless amount of risk.
However, you do not want to miss out on the rate increase as a result of the announcement, and you are willing to risk a small amount of funds to eliminate the volatility. For you, a call option is perfect.
Example
You may be interested to trade a Reliance call option with a strike cost of 1970 at a moment when the current price is INR 1950, based on liquidity in the options market.
However, since that call option was quoted at Rs. 10, you’ll have to spend a premium of INR 10 per stock, or INR 2,500. (Rs 10 x 250 units).
If the cash market value of Reliance reaches INR 1980 per share (i.e., your strike cost of Rs 1970 + premium charged of Rs 10) your profits starts.
Meaning of PE
pe full form in share market is short form of Put Option, However, The real full form is Put European. A put option is a contract that gives the holder the privilege but not the commitment, to sell or sell short at prior the value of an actual security at a specific cost within a set time period.
The strike rate is the fixed value at which a trader of a put option will sell. Shares, currencies, bonds, commodities, futures, and indices are all exchanged as basic assets for put options.
A call option is the exact opposite of a put option. There can never be a bidder without a seller in any market. Equally, you can’t get call options without put options in the options segment.
Share put options operate in the similar way that stock call options do. In this situation, nevertheless, the option investor is bearish on the share ‘s value and expects to benefit from a decline.
Things to keep in Mind While Buying Put Option?
Share put options operate in the similar way that stock call options do. In this situation, nevertheless, the option investor is bearish on the share ‘s value and expects to benefit from a decline.
You must keep a close eye on the stock’s movement. It’s possible that the share price drops, but then rises again just before expiration. This would mean you’d missed out on a chance to profit.
Example
Assume you own ABC stock and anticipate that the company’s quarterly performance will fall short of analyst expectations. This may cause the current stock price of INR 1950 per stock to decline.
You could buy a put option on ABC at the strike value of INR 1930 at a premium set by market of assume Rs 10 per stock to profit from a price drop. Assume there are 250 shares in the contract lot. To buy one put option on ABC, you’ll need to pay a premium of Rs 2,500 (250 stocks x Rs 10 per equity).
Profit
If the share price drops to Rs 1930, you might consider using your put option. This does not, nevertheless, cover your Rs 10/stock premium. As a consequence, you may want to wait until the stock price drop to at least Rs 1920.
Watch until the stock drops to Rs 1910 or 1900 levels if there is any sign that it will. If not, grab the chance and utilize the option as soon as possible. After deducting the premium costs, you will make a gain of Rs 10 per stock.
Loss
You may, however, disregard the option if the share cost increases rather than falls as predicted. Your loss will be restricted to Rs 2,500 or Rs 10 per share.
Indian Market Call & Put Option
Options & Put cannot be sold or bought on any securities in the Indian market. Only those shares that fulfill SEBI’s strict specifications are allowed to trade options. These shares were selected from within the top 500 shares, with parameters such as average daily market valuation and average regular traded volume in the last 6 months taken into account.
Conclusion
This is all from our side about what is CE and PE? However, we recommend you to learn Future and options from a mentor properly before entering in F&O Segment.
We hope we are able to explain what is CE and PE? to you. However, if you have any doubts you can just comment below.
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FAQ About what is ce and pe
ce and pe full form in share market?
CE- Call Option and Pe- Put Option.
What is pe and ce in hindi?
PE - पुट ऑप्शन & CE कॉल ऑप्शन
CE and PE full form in stock market
The CE and PE full form in stock market is CE - Call Option and PE Put Option.
PE full form in Share Market?
Pe Means Put option in share market.
What is PE Ratio?
The Put/Call Ratio (PCR) is a common derivative indicator that is used to assist traders determine the market's general momentum (mood).
