Trading options
In our time the options are quite popular among private investors. These derivatives are very unusual, therefore, Trading options requires good preparation. Let's start with a definition of the option.
The option is in the form of contract agreement between two parties, giving the buyer the right to buy (sell) a certain amount of financial assets (stocks or currencies) in a certain period of time at a set price. The purchase right is not an obligation, as in the case of the futures (we will look at later). Spread trading assumes the conclusion of the contract, according to which the seller is obliged to sell (buy) for the amount of assets according to agreed in advance the price. When trading options party, buying a call option, pays the seller a premium for the right to buy or not to buy (sell or not to sell) the underlying asset at its discretion.
Option «number» (English call option gives its holder the right to buy the underlying asset at a specified price within a fixed period of time. In this case, the seller of the option «number» is obliged to sell to the owner of the option is the base product.
The option «put» (English put option gives its owner the right to sell a certain amount of underlying asset at a specified price (strike) in a certain period of time. In this case, the seller of a put option» is obliged to buy the underlying asset.
As already mentioned, the buyer of the option contract, pays the seller a price, for which he sold the option. She is known as a premium option. Premium is a payment for the right to conclude the deal in the specified in the option period of time.
Options come in two styles - European and American. The European option may be exercised only on the date stated therein execution (expiration date). The American option may be exercised at any time prior to the expiration of the designated period.
