📞 Call options: buying and selling the right to buy

🎯 In 30 seconds: A call is the right to buy the underlying at the strike price. The buyer pays the premium and profits only if the underlying ends above strike + premium. The most the buyer can lose is the premium. The seller collects the premium, must keep margin, and loses if the underlying rises past the same breakeven, with no upper limit. With a Nifty lot of 65 (NSE, as of October 2026), a 24,000 call bought at 150 costs ₹9,750 and breaks even at 24,150 on expiry day. Most Indian traders close calls before expiry rather than hold them to the end.

What a call is, in one line

A call option gives its buyer the right, but not the obligation, to buy the underlying at the strike price at expiry. For a Nifty call, "buy the Nifty" is settled in cash: if the index ends above the strike, the buyer receives the difference times the lot size. For a stock call, an in-the-money position held to expiry ends with the buyer actually buying the shares.

Think of a call as a bet with a known entry fee. A cricket fan pays ₹500 for a fantasy contest where they win only if their team scores above 180. If the team makes 175, the fee is gone. If it makes 220, they collect. A call works the same way, except the payout grows smoothly with every point above the strike, and the "fee" goes to another trader, the call seller, rather than to a platform.

If you have not read What an option is, start there. This chapter assumes you know strike, premium, expiry and lot size.

Buying a call: the three numbers that matter

Before you buy any call, work out three numbers. They need nothing but the strike, the premium and the lot size.

• Cost (and maximum loss): premium x lot size. A Nifty 24,000 call at 150 points with a lot of 65 costs 150 x 65 = ₹9,750. That is also the most you can lose, plus charges.
• Breakeven at expiry: strike + premium = 24,000 + 150 = 24,150. Below that level on expiry day, you lose money. Above it, you gain.
• Profit per point above breakeven: one lot gains ₹65 for every Nifty point above 24,150 at expiry.

Remember that the premium is collected upfront. Under SEBI's circular of 1 October 2024, brokers must collect the full option premium from buyers before the trade, from 1 February 2025. You cannot buy a call on credit from your broker.

Worked example: one Nifty call at five expiry levels

Hypothetical numbers. Nifty is at 24,000. You buy one lot of the 24,000 call expiring in a week at 150 points. Cost: ₹9,750. Here is what happens if you hold to expiry. The settlement value is the amount the Nifty settles above 24,000, times 65.

A 2.5% rise in the Nifty, from 24,000 to 24,600, tripled the money. A flat week wiped it out. That asymmetry is why calls feel exciting and why most short-dated calls end up costing their buyers money: the index has to move enough, in the right direction, inside a short window.

The tax on exercise. If you hold an in-the-money call to expiry, it is exercised automatically and you pay securities transaction tax (STT) on it. From 1 April 2026, STT on an exercised option is 0.15% of its intrinsic value, paid by the buyer (NSE circular of 31 March 2026, based on the Finance Act, 2026). At 24,300, the intrinsic value of one lot is ₹19,500, so STT is ₹29.25. If you sell the same option in the market before the close, STT is 0.15% of the premium you sell at, charged to the seller. Since April 2026 both rates are 0.15%, so the old trap of exercise costing far more tax than a sale is much smaller than it once was. Brokerage and other charges still apply either way.

You do not have to hold to expiry

An option can be sold back at any time during market hours. Most retail traders close calls before expiry. The price you get depends on where the Nifty is, how much time is left and how much movement the market expects (implied volatility).

Hypothetical: two days after you buy at 150, the Nifty has risen to 24,200 and the call trades at 260. You sell. Profit: (260 - 150) x 65 = ₹7,150 before charges. You did not need the Nifty to hold 24,200 until expiry. You captured the move while it was there.

The other side: if the Nifty slips to 23,850 over those two days, the call might trade at 50. Selling then gives a loss of (50 - 150) x 65 = -₹6,500. Holding on in hope often turns that into the full ₹9,750 loss. Decide in advance where you will get out, as covered in Managing options risk.

Choosing a strike: in, at or out of the money

A call is in the money (ITM) when the strike is below the current price, at the money (ATM) when the strike is at or near it, and out of the money (OTM) when the strike is above it. The table uses hypothetical prices from a standard pricing model for a Nifty at 24,000, seven days to expiry, implied volatility 14% and a lot of 65.

What the table shows:

• OTM calls are cheaper but need a bigger move. The 24,400 call costs a quarter of the ITM call, but a 1.25% rise in the Nifty still loses all of it.
• ITM calls behave more like the index. Their delta is higher, so they move more point for point with the Nifty. They cost more, so the most you can lose is bigger.
• Delta is a rough guide to the odds. A delta of 0.22 is loosely read as a 22% chance of ending in the money, under the model's assumptions. It is not a promise. The Greeks explains it properly.

A call compared with buying the shares

Hypothetical Sharma Foods Ltd at ₹1,500, hypothetical lot of 1,000 shares. Real lots are set by the exchange.

Calls replace a large amount of capital with a time limit and a hurdle. That trade-off can make sense if you have a specific view about how far and how fast. It rarely makes sense as a cheaper way to own a business you like. For that, owning the shares or an index fund is simpler, as covered in Investing vs trading.

Selling (writing) a call

The call seller is the other side of the trade. They receive the premium and take on the obligation to pay out if the underlying rises above the strike.

Hypothetical: you sell one lot of the Nifty 24,000 call at 150. You receive ₹9,750, less charges. Your outcomes at expiry:

• Nifty at or below 24,000: the call expires worthless. You keep ₹9,750.
• Nifty at 24,150: you pay out 150 x 65 = ₹9,750. Net zero.
• Nifty at 24,720 (a 3% jump): you pay out 720 x 65 = ₹46,800. Net loss ₹37,050, almost four times what you collected.

Three things make selling calls very different from buying them:

• Margin. The seller must keep margin with the broker, calculated by the clearing corporation's risk system (SPAN plus an exposure margin). For a naked index call it is many times the premium you collect, because it must cover a large move against you. The figure changes daily; your broker's margin calculator shows it before you trade.
• Unlimited loss. There is no ceiling on how far an index or share can rise in a week. Gaps at 9:15 am after overnight news can blow through a stop loss.
• Expiry-day margin. SEBI added an extra extreme loss margin of 2% on short options that expire that day, from 20 November 2024.

A call seller who owns the shares (a full lot) is running a covered call. Their loss above the strike is offset by gains on the shares, so the risk is very different. A seller who owns nothing is "naked". This is the position that produces the worst stories.

Costs and evidence

Options look cheap to trade because each order is small in rupees. The charges add up because traders trade often. On each option trade, expect brokerage, exchange transaction charges, SEBI's turnover fee, GST on brokerage and charges, stamp duty on the buy side, and STT of 0.15% of the premium on the sell side (rate from 1 April 2026). What trading really costs in India works a full contract note.

SEBI's August 2026 study of individual traders found that options accounted for 92% of their aggregate losses in FY26, and that individuals paid about ₹25,000 crore in transaction costs in each of FY25 and FY26. Its earlier study found 93% of individual F&O traders lost money over FY22 to FY24. Buying calls is not banned or doomed, but the starting assumption should be that the average retail call buyer loses.

Try it

On NSE's option chain for the Nifty 50, pick the nearest weekly expiry. Write down the last traded price of four calls: one strike two steps below the Nifty, one at the money, one two steps above and one six steps above. For each, compute cost per lot (using the current lot size from your broker's order window), breakeven, and the profit or loss if the Nifty ends 1% higher on expiry day. Then come back after expiry and check the actual settlement. Which calls made money? How much did the Nifty actually move compared with what you needed?

Sources

• NSE: Changes in rates of Securities Transaction Tax, circular of 31 March 2026 (PDF)
• SEBI: Measures to strengthen equity index derivatives framework, circular of 1 October 2024
• NSE: Revision in market lot of derivative contracts on indices, 3 October 2025 (PDF)
• NSE: Nifty 50 futures and options, contract specifications
• NSE: Option chain
• SEBI: Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26), August 2026 (PDF)
• SEBI: Press release 22/2024, updated study on F&O losses FY22 to FY24, 23 September 2024 (PDF)