Every derivative has two options: thecall option and the put option. It is the one that gives the right but not the obligation to the buyer of the call option to buy the call option. The buyer of a call option can exercise his right even before expiration. When the buyer exercises his...
There are two parts: the call option and the Put option. When the option holder can purchase the share or the security at a price below the current market price, it is called an in-the-money call option. In contrast, when the option holder can sell the share or the security at a pr...
Elements like the cost of the underlying asset, the strike price, the remaining time until expiration, and market volatility impact the value of a call option. Call options may be advantageous if the price of the underlying asset increases above the strike price, enabling the option holder to ...
When it comes to investing, there are a variety of strategies that can be employed to potentially maximize profits and mitigate risks. One such strategy is writing an option. In this blog post, we will explore the definition of writing an option and provide put and call examples to help you...
2. Put options Puts give the buyer the right, but not the obligation, to sell the underlying asset at the strike price specified in the contract. The writer (seller) of the put option is obligated to buy the asset if the put buyer exercises their option. Investors buy puts when they be...
When the stock trades at the strike price, the call option is “at the money.” If the stock trades below the strike price, the call is “out of the money” and the option expires worthless. Then the call seller keeps the premium paid for the call while the buyer loses the entire in...
Unlock the secrets of options trading with our in-depth guide to Option Pricing Models. Explore the history, different models, and practical examples.
Keep full premium for expired out of the money options:If the written option expiresout of the money—meaning that the stock price closes below the strike price for a call option, or above the strike price for a put option—the writer keeps the entire premium. ...
Understanding Put-Call Parity Put-call parity is a fundamental principle in options pricing that defines the relationship between the price of a European call option and a European put option with the same underlying asset, strike price, and expiration date. ...
Put-Call Parity is a fundamental concept in options trading that establishes the relationship between put and call options with the same strike price and expiration date. According to the principle, the combination of a long call option and a short put option should be equivalent to owning the ...