Option Contracts

There are four key things to know on an options contract:

1. Option type: There are two types of options you can can buy or sell:
 Call: An options contract that gives you the right to buy stock at a set price
within a certain time period.
 Put: An options contract that gives you the right to sell stock at a set price
within a certain time period.

2. Expiration date: The date when the options contract becomes void. It is the due
date for you to do something with the contract, and it can be days, weeks, months, or
years in the future.

3. Strike price, or exercise price: The price at which you can buy or sell the stock if
you choose to exercise the option.

4. Premium: The per-share price you pay for an option. The premium consists of:
 Intrinsic value: The value of an option based on the difference between a
stock’s current market price and the option’s strike price.
 Time value: The value of an option based on the amount of time before the
contract expires. Time is valuable to investors because of the possibility that
an option’s intrinsic value will increase during the contract’s time frame. As the
expiration date approaches, time value decreases. This is known as time
decay or “theta,” after the options pricing model used to calculate it.

When you call up an option quote, you will see a table of available options
contracts, called option chains:
Strike: The price you would pay or receive if you exercised the option.

Contract name: Just like stocks have ticker symbols, options contracts have option
symbols with letters and numbers that correspond to the details in a contract. In a
real option chain, the company’s ticker symbol would come before the contract
name.

Last: The price that was paid or received the last time the option was traded.

Bid: The price a buyer is willing to pay for the option. If you are selling an option, this
is the premium you would receive for the contract.

Bid quantity: It stipulates both the price the potential buyer is willing to pay and
the quantity to be purchased at that price.

Ask: The price a seller is willing to accept for the option. If you want to buy an
option, this is the premium you would pay.

Ask quantity: The quantity of future/option contracts that the seller is ready to sell.

Change: The price change since the previous trading day’s close, also expressed in
percentage terms.

Volume: The number of contracts traded that day.

Open interest: The number of options contracts currently in play.

Change in OI: Change in OI occurs only when the new buyer-seller enters the market
and creates new contract. For example, if one of the traders has 100 contract short
(i.e., sale) and another trader has 100 contract long (i.e., purchase) then these
traders buy and sell the contracts and after that it is deducted from the open interest.

RISK MANAGEMENT IN COAL INDIA LIMITED (CIL)

CIL has a comprehensive Risk Management Framework in place, which consists of :

(a) A process to identify, prioritize and formulate mitigation plans for prioritized
risks, etc.
(b) A framework of roles & responsibilities of various officials, Committees and
the Board, in discharging the risk management process, periodicity of
reporting (Risk Management Calendar) and related templates and enablers.

As part of this Risk Management Framework, risk owners and mitigation plan
owners have been identified for each risk and corresponding mitigation plans to
ensure continuous risk monitoring and risk mitigation.
 
A sub-committee of the Board of Directors viz. Risk Management Committee (RMC)
has been constituted in compliance with SEBI (LODR)Regulations 2015. The RMC,
inter alia, is also responsible for the oversight of the risk identification, risk
prioritization, mitigation plan formulation and risk monitoring activities in CIL.
 
CIL engaged a Consultant who worked under the guidance of the RMC to facilitate
implementation of the governance process envisaged in the Risk Management
Framework, including facilitation for formulation of risk mitigation plans for the
prioritized risks of CIL.
 
The Consultant has completed updated Risk Register, Prioritization of Risk, Risk that
Matters with its mitigation plan for all the Subsidiaries of CIL. They had also
completed the details of the Key Risks which are common across the Subsidiaries
and specific to one or more Subsidiaries and submitted the final report to CIL for
implementation.
 
Risk Management is a continuous journey to align the objectives and vision of CIL
through regular risk-managed business operations.

Organizations need to improve their approach to managing risks to meet the

demands of an evolving business environment and to meet expectations of various
stakeholders. A pre-requisite is therefore to develop, implement and sustain a
framework of risk management, which would enhance executive strategy setting and
decision-making processes. Such a risk management framework would support the
organization to meet objectives, including the following:
1. Providing insights in strategic decision making
2. Enhancing alignment between organizational objectives, strategy, performance,
and outcomes
3. Providing mechanisms for effective risk-managed governance and oversight on
performance
4. Enhancing greater transparency for stakeholders

Vasu Sharma
PGFC2057