Short notes on Options Contracts



Posted on 23-04-2016        By ADMIN



Short notes on Options Contracts

Options contracts, appropriately, imbue the holder of thecontract with the right to purchase or sell the designated asset at a specifiedprice. This specified price is called the strike price. It is important toremember that the holder of the contract incurs no obligation. He may decidenot to exercise the option for whatever reason. However, the issuer of theoption, called the writer, must buy or sell the asset if the holder doesexercise the option. Options are temporary instruments that expire at apredetermined date. Options allowing the holder to purchase an asset arereferred to as call options. Options allowing the holder to sell an asset areput options. In all cases, the writer of the option receives a commissioncalled a premium.



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