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Watermarking is defined as the technique of embedding information in some cover. It takes one piece of information and embeds it within another. Mostly digital data is used for embedding. In this paper, we present a way to embed this digital information into the data packet. TCP/IP packets are transmitted over a network in large quantity. Within TCP/IP header there are number of fields that are not used for normal transmission or are "optional" to be set as needed by the sender of the packet. An analysis of the areas of a typical IP header fields that are either unused or optional reveals many possibilities where data can be stored and transmitted and this gives the intuition for finding free space within such packets. By embedding information in the options field of IP packet, we can make use of unused space of the IP header and can transmit our digital data within TCP/IP packets from sender to the receiver. One advantage of transmitting data in the header is that intruders will not have any idea that data is transmitted in the header, intruders will concentrate only on the payload of the packet. Encryption and compression however are optional in performing watermarking, but by making use of such techniques the security in the design can be incorporated. Challenges like loss of packets and many others are also handled in the design.