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Options

The document discusses options and derivatives. It defines options as financial instruments based on underlying securities values. It describes call and put options as the right to buy or sell assets at a price. It also defines European and American option styles and basic option terminology like exercise price, expiration date, and premium.

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TEAM DHUNILAL
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16 views7 pages

Options

The document discusses options and derivatives. It defines options as financial instruments based on underlying securities values. It describes call and put options as the right to buy or sell assets at a price. It also defines European and American option styles and basic option terminology like exercise price, expiration date, and premium.

Uploaded by

TEAM DHUNILAL
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Options

Submitted By;
Shivansh Dhawan
B.com(Hons.)4th semester
Evening Shift
01521188822
What is options?
• The term option refers to a financial
instrument that is based on the value
of underlying securities such
as stocks, indexes, and exchange
traded funds (ETFs). An options
contract offers the buyer the
opportunity to buy or sell—depending
on the type of contract they hold—the
underlying asset. Unlike futures, the
holder is not required to buy or sell
the asset if they decide against it.
What is Derivative?
• Derivative is an instrument
which derives its value from
underlying asset.
What are the call type ?
• Call: Right to buy an underlying
asset at a price for a defined time
horizon.

• Put: Right to sell an underlying


asset at a price for a defined time
horizon.
What are the styles of the options?
• European: Gives owner the right
to exercise the option only on
the expiration date.

• American: Gives owner the right


to exercise the option on or
before the expiration date.
Basic Terminology :
Exercise Price (or Strike Price): The exercise price is the price at which the underlying
asset can be bought or sold when trading a call or put option, respectively. It's also
known as the strike price. The difference between the exercise price and the underlying
security’s price determines if an option is “in the money” or “out of the money”.

Expiration Date: The expiration date is the last day you can exercise your right to buy or
sell the underlying stock at the agreed-upon strike price. If you hold your contract until
expiration, and it is either out-of-the-money or in-the-money but you choose to not
exercise it, the option will expire worthless. Options can have various expiration periods,
ranging from as short as one day to several months or even years.

Option premium :The option premium is the price paid by the option buyer to the
option seller. It represents the cost of obtaining the right to potentially buy or sell the
underlying asset. The premium is influenced by the option’s intrinsic value, volatility, and
time until expiration.
THANK YOU

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