Derivatives are securities whose value is determined by market prices and interest rates from

several other securities. Option is an agreement / contract between option seller (seller or writer)
with option buyer (buyer), where option seller guarantees the right (not an obligation) from
option buyer, to buy or sell certain asset at specified time and price. Options are financial
instruments that are: Created by exchanges, not by companies, Purchased and sold primarily by
investors, Important for investors and financial managers

Stock options are issued by investors to be sold to other investors, companies that are issuers of
shares that are used as a benchmark are not involved in the option transaction. Based on the form
of rights that occur, options can be grouped into two, namely: Buying options and selling
options. Option terminology is divided into the first three 1.Exercise (strike) price, which is the
price per share that is used as a benchmark at maturity, 2. Expiration date, which is the time limit
where the option can be implemented: Options with American style can be carried out at any
time up to the specified time limit, European style options are carried out only at the expiration
date. 3. Option scheme, is the price paid by the option buyer to the option seller.

The basic terms for the relationship of stock prices and the price of implementing call options
and put options are: If the stock price (P) is greater than the implementation price (E) of the call
option, this call option is called money (intrinsic value = PE). If the stock price (P) equals the
exercise price (E) of the call option, this call option is called money (intrinsic value = 0). If the
stock price (P) is smaller than the exercise price (E) of the call option, this call option is called
money. If the stock price (P) approaches the implementation price (E) of the call option, this call
option is called near money. If the share price (P) is greater than the implementation price (E) of
the put option, this put option is called money (intrinsic value = 0). If the stock price (P) is equal
to the implementation price (E) of the put option, this put option is called money. If the stock
price (P) is smaller than the implementation price (E) of the put option, this put option is called
money (intrinsic value = E-P).

The result is an exercise in option results. Payoff still shows gross profit from the difference in
stock prices marketed at the exercise price. Profit is net income, that is the result, minus the
purchase price of the option. Payment and profit for call options are if the market share is lower
or equal to the exercise price (P ≤ E) then the option will not be used so there is no result (prize =
0) and if the market share is more than the exercise price (P ≥ E) then the prize value = (PE) so
that the call option buyer will benefit from using the option. If the option buyer gets the benefit
of getting a prize (P-E), the call option seller will lose the same value. And to calculate profit
from the use of buying options is calculated by reducing the payoff with the option price (profit
= payoff - HOB). The rewards and benefits for the put option are if the stock price on the market
is higher or equal to the implementation value (P ≥ E) then the put option will not be used so
there is no result (payoff = 0). If the market price is smaller than the exercise price (P ≤ E), the
prize value = (E-P). if the put option buyer gets a benefit by getting a prize (E-P), then the put
option seller will lose the same value. The way to calculate profits from using put options is to
reduce payoff with the option price (profit = payoff - HOJ). The time value can be calculated by
the formula: Time value = option market value - intrinsic value. The shorter the maturity of
options, the smaller the price fluctuations and the lower the price of options and vice versa.