Option trading enables investors to buy or sell the right to purchase or sell an underlying asset at a predetermined price within a specified timeframe. For instance, consider buying a call option for 100 shares of Company X at a strike price of Rs. 110, with an expiry on December 1. If, on December 1, Company X shares trade above Rs. 110, you can exercise the option, buying shares at a lower price to profit from the market price. However, if the shares trade below Rs. 110, you can opt not to exercise, limiting your loss to the premium paid for the option. This strategy offers flexibility, allowing investors to capitalize on price movements and manage risks effectively.