What is CE and PE in Stock Market? Explanation with Examples 2022

CE and PE in stock market are option trading terms, CE means Call Option and PE means Put Option. The complete concept will be explained with examples further.

In this article we have explained CE and PE in stock market in detail, before diving into the concept of CE and PE, let’s understand the basics of Options trading.

Options trading is a confusing segment in the investing world, even for people with a finance background. There are various technical terms like ‘CE’, ‘PE’, ‘lot size’, ‘Strike price’, and the rest which one needs to understand before making money out of it.

It is a segment where investors believe that money can be made quickly. But it is also the same area where one loss is enough to wipe out all the invested capital. What inspires people is the rags-to-riches story they have heard off.

But they forget that there are more riches-to-rags stories rather than the other way around. Hence before jumping into the world of options trading, terms like CE and PE need to be thoroughly understood. In this article, we’ll understand the same.

Something on option premiums and the strike price

Premium is the money required to be paid by the option buyer to the option seller/writer. Against the payment of premium, the option buyer buys the right to exercise his desire to buy (or sell in case of put options) the asset at the strike price upon expiry. Option premiums play an extremely crucial role when it comes to trading options.

The strike price is the price at which the option buyer will buy the share prior to or at the expiry of the contract. And the opposite is the case with option sellers.

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What is CE in the stock market?

CE is the short form of the Call option. More precisely, it is known as Call European. These types of investment contracts provide the option investor the right, but not the obligation, to purchase a stock, bond, product, or any other asset at a pre-determined coast within a certain time period.

When the value of these underlying assets rise, the call buyer gains. In short, buying a call option on security will give the investor a choice to buy a fixed number of shares of that company at a fixed price (known as the strike price) before a particular date (known as the expiry date).

A call option holder is bullish on his position and will benefit from his position when the share price rises above the strike price.

Example of a Call option

You buy a call option on Reliance Industries Limited with a strike price of ₹1990 at a moment when the current price is ₹1970. Since the call option was quoted at ₹20, you’ll have to shell out a premium of ₹20 per share, or ₹5000 (20*250).

Now, if in the cash market, the value of Reliance shares reaches ₹2110/share, you will start reaping profits.

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What is PE in the stock market?

PE is the short form of Put Option. It is specifically known as Put European. A put option is a contract that gives the holder of the option the privilege but not the commitment, to sell the security at a specific price (strike price) within a certain time period.

A put option is the exact opposite of a call option. There can never be a transaction without either a buyer or a seller. In a similar manner, investors can’t buy call options without similar put options being offered.

A put option holder is bearish on the share value and will benefit from his position when the share price goes below the strike price.

Example of a Put option

Consider the same example we took with regards to the call option.

You buy a put option on Reliance Industries Limited with a strike price of ₹1990 at a moment when the current price is ₹2130. Since the call option was quoted at ₹20, you’ll have to pay a premium of ₹20 per share, or ₹5000 (20*250).

Now, if in the cash market, the value of Reliance shares reaches below ₹1970/share, you will start reaping profits.

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Best Mediums for CE and PE Calls

There are multiple sources where you can get calls on F&O, But you should be very careful while considering these calls, enter the trade on your own risk, do your own analysis as well before setting up any F&O trading, In F&O most traded options are Nifty and Bank Nifty.

Here are the list of mediums

  • TV Channel – ZeeBusiness (Cash ka Option), (Basin ka haseen shares)
  • Telegram Groups – There are multiple telegram group , one recommended channel is “ENGINEERS OF STOCKMARKET

How to do Options Trading in Upstox?

There are multiple stock trading platforms to do CE and PE trading, we will be explaining you how to do options trading in Upstox.

Step 1: Open the Upstox app and navigate to “Search” Icon at left top corner.

CE and PE Upstox 1


Step 2: Navigate to F&O menu


Step 3: Navigate to F&O menu and type desired Indices or stocks to trade, with desired CE and PE select any one.

CE and PE Upstox 3

Step 4: Now select any option “Buy” or “Sell”

CE and PE Upstox 4

Step 5: Now you need select 1 lot or more, minimum quantity to be traded will be mentioned in that field, we recommend, since you are beginner select 1 lot and start trading and click on “Review” button.

CE and PE Upstox 5

Step 6: Once you click on “Review” button in the next screen you need to confirm the order by swiping the “Swipe to schedule order

CE and PE Upstox 6

You can also do options trading with other trading apps as well, you can choose from the list.

Some basic yet important pointers to consider while trading in options

  • Buy a call option or sell a put option only when you expect the market to go up.
  • Buy a put option or sell a call option only when you expect the market to go down.
  • The buyer of an option has unlimited profit potential and limited risk (to the extent of the premium paid).
  • The seller of an option has an unlimited risk potential and limited reward (to the extent of the premium received).
  • Majority of options traders prefer to trade options only to capture the variation in premiums.
  • Option premiums tend to gyrate drastically – as an options trader, and you can expect this to happen quite frequently.

Conclusion

Discussed above were some of the important terminologies that one needs to know before diving deep in the world of options. While loads of money can be made by trading in options, it is not as easy as it looks.

In a recent interview, the founder of Zerodha, Mr Nithin Kamath revealed that less than 1% of the active traders present on Zerodha earn FD beating returns. This means the rest 99% did not even earn what is given by FDs.

Keeping this in mind, one should trade cautiously.

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FAQs

What is the full form of CE in Stock Market?

The full form of CE is Call Option

What is the full form of PE in Stock Market?

The full form of PE is Put Option

Is Option Trading Safe?

Option trading is quite risky, compared to normal trading, it requires lot of market analysis, option trading is done by professional traders, we recommend beginners to stay away from this type of trading.

Is options trading Better Than Stocks?

Option trading has high risk involved in it, In terms of short term returns option trading is better than delivery stock trading.

Which platform is best for options trading?

There are many stock trading platforms for option trading, but we recommend Zerodha for options trading, since its simpler to use and its fast.

I have seen some groups provide Call and Put Option are they accurate?

Beware of those calls, would say do your own research and invest in CE or PE, or take expert financial advisor help.

I am a beginner in trading, can I start CE PE trading?

A big NO!, first you need to understand the concept of trading, we would say do intraday or delivery trading, don’t enter the F&O it might washout your portfolio.

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Vineet Nandwani

I am from a commerce background. Having completed my Bachelors of Business Administration (BBA) in 2020, I went on to pursue the Chartered Financial Analyst (CFA) course, which is a professional course in finance. The course has 3 levels, and I have appeared for my level 2 exam. Besides, I have also worked at a Wealth Management Firm in Surat, Gujarat for 2 years. I am also investing in stocks and mutual funds in my personal capacity for three years. I like to remain updated about the happenings in the financial world. Email: vineet.nandwani942@gmail.com

24 thoughts on “What is CE and PE in Stock Market? Explanation with Examples 2022”

  1. Sir, I have taken UBL 28 July 2022 CE 1620 @50.90 on 12/7/2022 under lot size 400, on 11/7 and 12/7 price didn’t exceed above rate, so couldn’t book profit. Now I want to sell it even at cost price. Sir what is the future of this CE call

    Reply
    • I was looking into the chart pattern of UBL, and I could see a strong chart pattern and its uptrend, and if I see the day chart it’s still in the resistance, wait for a breakout at 1680 and then trade, only if the market is bullish.

      Reply
  2. Hello.
    Nice explanation. I have been following Rachnaji for a long time.

    Just one doubt where you have mentioned the ‘Example of a Put option’. Shouldn’t this be Put option? It says -“You buy a call option on Reliance Industries Limited with a strike price of ₹1990 at a moment when the current price is ₹2130. Since the call option was quoted at ₹20, you’ll have to pay a premium of ₹20 per share, or ₹5000 (20*250).”
    Please clarify.
    Thank you

    Reply
    • Thanks for pointing out this error, we have fixed the issue, it should be “you buy a put option” instead of “call option”

      Reply
    • It depends on the expiry of the options, make sure you see the expiry date, that is the time period where you need to square off your stock or indices

      Reply
    • There are multiple social media channels and community like trading hub, engineers of stock market etc., but do your own research before starting trading activity.

      Reply

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