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  • Session 2 - FD

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    Daksh Khullar
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    This document defines financial terms related to derivatives and options trading. It explains that a call option provides the right to buy an asset at a strike price, while a put option provides the right to sell an asset at a strike price. Key terms for options are also defined, including the strike price, price of the option, and whether an option is in, out, or at the money based on the relationship between the strike price and the spot price of the underlying asset. The document also distinguishes between American and European options, noting that American options can be exercised at any time, while European options can only be exercised at maturity.

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    Financial Derivatives course for Finance201

    Original Title

    Session 2_FD

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    This document defines financial terms related to derivatives and options trading. It explains that a call option provides the right to buy an asset at a strike price, while a put option provides the right to sell an asset at a strike price. Key terms for options are also defined, including the strike price, price of the option, and whether an option is in, out, or at the money based on the relationship between the strike price and the spot price of the underlying asset. The document also distinguishes between American and European options, noting that American options can be exercised at any time, while European options can only be exercised at maturity.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    6 views6 pages

    Session 2 - FD

    Uploaded by

    Daksh Khullar
    This document defines financial terms related to derivatives and options trading. It explains that a call option provides the right to buy an asset at a strike price, while a put option provides the right to sell an asset at a strike price. Key terms for options are also defined, including the strike price, price of the option, and whether an option is in, out, or at the money based on the relationship between the strike price and the spot price of the underlying asset. The document also distinguishes between American and European options, noting that American options can be exercised at any time, while European options can only be exercised at maturity.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 6

    More Terms

    • Open Interest
    • Margin (Standard Portfolio Analysis of Risk (SPAN), Exposure Margin)
    • Lot
    • Bid
    • Ask
    • Bid Ask Spread
    • Candle Light Diagram
    • VaR (Value at Risk)
    Financial
    Derivatives:
    Options
    Options
    • A call option is an option to buy a certain asset by a certain date for a
    certain price (the strike price).
    • Right to Buy
    • Obligation to Sell

    • A put option is an option to sell a certain asset by a certain date for a


    certain price (the strike price).
    • Right to Sell
    • Obligation to Buy
    Terms in Options
    • Strike Price… • Implied Volatility (Comes from
    Black Scholes Formula-Post Mid
    • Price of Option… Term)
    • Last Traded Price (LTP) • In the Money (Strike < Spot in
    • Long on Call… Call and Vice Versa in Put)

    • Short on Call…
    • Out of the Money (Strike > Spot in
    Call and Vice Versa in Put)
    • Long on Put…
    • At the Money (Strike = Spot)
    • Short on Put…
    American v s European Options
    ersu

    • An American option can be exercised at any time during its life.


    • A European option can be exercised only at maturity.
    Thank you
    for your patience

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