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.
related trading
systems, automated
traded systems, futures
contract
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