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Derivatives - Options

Derivatives - Options

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Published by Franklin Arnold

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Published by: Franklin Arnold on Jan 07, 2011
Copyright:Attribution Non-commercial

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01/07/2011

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Options
1
 
Index OptionsThese options have the index as the underlying.Stock OptionsThese are options on individual stocks. A contract givesthe holder the right to buy or sell shares at specifiedprice.Buyer of an optionThe buyer of an option is the one who by paying theoption premium buys the right
but not the obligation
to exercise his option on the seller.
2
 
 W 
riter of an optionThe writer of a call/put option is the one who receivesthe option premium and is thereby obliged to sell/buy the asset if the buyer exercises on him.Call option A call gives the holder the right but not the obligation tobuy an asset by a certain date for a certain price.Put option A put option gives the holder the right but not theobligation to sell an asset by a certain date for a certainprice.
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