Option contracts are the trade right and obligation for buyer and seller respectively on underlying asset at a pre determined price on or before the time specified in the option contract. Having said that, the buyer of the option contract acquires the right to to buy/sell the asset and the seller of the option contract is under the obligation to honour the trade if option is exercised by the owner of the option.
Underlying asset can be stocks, indices, commodity future, currency or interest rates.
Option premium is the consideration paid upfront by the option holder (buyer of the option) to the option writer (seller of the option).
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