Option Contract

An options contract is a derivative (deals with an underlying security) that gives the holder the right to exercise the contract and the seller the obligation to fulfill the contract. An option may be tied to a futures contract. See Option Contract Basics for a brief introduction.

Starting to the point on put and call positions; Put options have to do with rights to sell while call options deal with rights to buy at a specified price, better known as the strike price. While options may too be In, Out or At the Money depending on whether it is a put or a call option, see details that describe these market values and puts and calls contrasted.

An option writer of a contract, the 'writer' or 'grantor', is the seller of the contract that normally spells out:

• The option type; a put or call
• The strike/exercise price and the expiration date
  Noting that an American option may be exercised anytime
  before expiration. But a European style option may only be exercised
  during a set time period/it's expiration .
• The quantity of the security along with multiplier. Spelling out too, the
  way settlement shall occur on exercise.

The option lifetime, or option period, refers to the time spanning between the contractual creation of an option and the expiration date.

For an explanation of option symbols and their derived, representative meanings.

Commodities are traded on major option exchanges throughout the world with many here listed. In contrast to these, are OTC or over-the-counter options - which are not on the exchanges and are traded as the name implies, over the counter.

Option premiums are used to describe the price at which amounts are paid, and vary with that of futures.

The OCC - the Options Clearing Corporation, operates under the CFTC and Securties and Exchange Commision and provides clearing, assignment and settlement services for contract transactions.

When the transaction is executed and associated with the opening transaction, the amount) either paid or received is considered to take the form of realized gains or losses while accounting for such fees as transaction costs.

The concepts of intrinsic value & parity seek to establish a model of valuation for the option as an import tool used by traders.

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