SUBMITTED TO: SUBMITTED BY:

DR. RAJNI CHUGH KANCHAN VERMA

ASSISTANT PROFESSOR ROLL NO. 39
OPTIONS:-
 An options is a contract that gives its buyer (holder) a right but not
obligation to buy or sell a specified asset at a specified price on or
before a specified future date.

 An options is a contract sold by one party to another party.

 It gives a right to the buyer. The seller has the obligation but no right.

 The buyer and the sellers are not on equal footing.

 The buyer has to pay some price , known as options premium to the
seller of the option.
 BASIC TERMINOLOGY
Exercise price :- It is a specified price at which an option can be
exercised. It is also known as strike price. The exercise price for a call option
is the price at which the security can be bought (on or before the
expiration date) and the exercise price for a put option is the price at
which the security can be sold.

Expiration Date :- The date, on or before which, the option may be

exercised is termed as expiration date. Beyond this date the right of the
options holder ceases to exist.

Option Premium:- The option holder has to pay some amount known as
options premium to the option writer for availing the right. It is required
because the buyer of the options has a right while seller of the options has
obligations to buy or sell at the specified price.
 TYPES OF OPTIONS
 According to the option rights:-
1. Call options
2. Put options

 According to the underlying assets:-

1. Stock option
2. Interest Rate option
3. Index option
4. Commodity option
5. Currency option
CALL OPTIONS
 An options contract that gives its holder the ‘right to buy’ a specified
asset at a specified price on or before a specified future date.

 A call option is bought when the buyer of the call option fears a rise in
underlying asset’s price.

 It is exercised when the stock price is greater than the exercise price.

 The holder of the call options can buy the stock or asset at the exercise
price which is lower than the prevailing market price.
PUT OPTIONS
 A put option provides a right to sell.

 An option contract that gives its holder the ‘right to sell’ a specified
future date.

 The seller has the obligation to buy.

 A put option is bought when the buyer of the put option fears a decline
in underlying asset’s price.

 A put option is exercised when the stock price is lower than the exercise
price.
 STYLES OF OPTIONS:

EUROPEAN AMERICAN
OPTIONS OPTIONS
WAYS TO WRITE OPTIONS

Covered Naked
Option Option