What are Paired Option Contracts?

Paired option contract meaning

Paired option contracts in trading are special contracts that allow you to take 2 positions on the same option with the same strike price and expiration date. They consist of 2 individual legs, a call option, and a put option, with the same strike price and expiration date. The market lot and tick size of a paired option contract correspond to the market lot of the corresponding call option and put option.

When you 'Buy' a paired option contract, you buy a call option and sell a put option, whereas when you 'Sell' a paired option contract, you sell a Call option and buy a Put option.

Paired option contract terms

Only regular limit orders are permitted for paired option contracts. Market and stop-loss orders are not permitted. Orders with disclosed quantity as well as GFD and IOC retention types are permitted.

Paired option contract example

For example, if you buy 1 lot of the paired TCS option contract with a strike price of 3600 and expiry May 31, then a Buy Call option for 3600 May 31 of 1 lot and a Sell Put Option for 3600 May 31 of 1 lot will be generated.

There are at least 2 In-the-Money (ITM), 2 Out-of-the-Money (OTM), and 1 At-the-Money (ATM) paired option contracts available for trading.