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  • Options Day 1

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    Umesh
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    Options allow investors to speculate on or hedge against stock volatility. An options contract gives the holder the right to buy or sell the underlying asset at a certain expiration date and strike price. There are two main types of options: European, which can only be exercised at expiration, and American, which can be exercised at any time up to expiration. The buyer and seller have different risks and potential profits: the buyer's risk is limited to the premium paid while the seller's risk is unlimited, but their potential profits are also different. Options trading provides benefits like hedging, speculation, leverage, and profits in many market conditions, but also risks such as volatility, time decay, and higher potential losses.

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    Options learning

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    Options allow investors to speculate on or hedge against stock volatility. An options contract gives the holder the right to buy or sell the underlying asset at a certain expiration date and strike price. There are two main types of options: European, which can only be exercised at expiration, and American, which can be exercised at any time up to expiration. The buyer and seller have different risks and potential profits: the buyer's risk is limited to the premium paid while the seller's risk is unlimited, but their potential profits are also different. Options trading provides benefits like hedging, speculation, leverage, and profits in many market conditions, but also risks such as volatility, time decay, and higher potential losses.

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    © All Rights Reserved
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    14 views6 pages

    Options Day 1

    Uploaded by

    Umesh
    Options allow investors to speculate on or hedge against stock volatility. An options contract gives the holder the right to buy or sell the underlying asset at a certain expiration date and strike price. There are two main types of options: European, which can only be exercised at expiration, and American, which can be exercised at any time up to expiration. The buyer and seller have different risks and potential profits: the buyer's risk is limited to the premium paid while the seller's risk is unlimited, but their potential profits are also different. Options trading provides benefits like hedging, speculation, leverage, and profits in many market conditions, but also risks such as volatility, time decay, and higher potential losses.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 6

    OPTIONS TRADING

    ASHUTOSH BAJAJ
    Introduction to Options Trading
    • What are Options?

    - Options are a type of derivative product that allow investors to Speculate on or Hedge

    against the volatility of an underlying stock.

    • What are Derivatives?

    - Derivatives are financial contracts which derive their value from UNDERLYING

    security.

    - Futures

    - Options
    Options Contracts
    An option contract is an agreement that gives the option holder the right to buy or sell the
    underlying asset at a certain date (known as an expiration date or maturity date) at a prespecified
    price (known as strike price or exercise price).

    • European • American
    - CE ( Call European )

    - PE ( Put European)
    Options Features

    • Option Holder or Buyer of the Option

    • Option Seller or Writer of the Option

    • Strike Price

    • Expiration date

    • Option Premium
    Buyer Risk: Premium: Limited Risk for Buyer
    Profit Buyer: Unlimited
    Seller : Profit : Limited
    Risk for Seller: Unlimited

    45100- 45200-45300-45400
    Benefits / Risks in Options Trading

    • Hedging
    • Volatility
    • Speculation
    • Time Decay
    • Leverage
    • Higher Potential of loss
    • More Potential
    • Margins
    • Flexibility
    • Liquidity
    • Profits in all conditions

    • Cash Flow Generation

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