Volume : III, Issue : VI, June - 2013

A Study on How “Options’ Work in Investment – A Guide to the Investors

Dr. Gaurav Malpani

Abstract :

Options are derivative instruments. An option is a contract that gives the buyer the right, but not the obligation, to but or sell an underlying asset at a specific price (strike price) on or before a certain date. An option, just like a stock or bond, is a security. It is also a binding contract with strictly defined terms and properties. Writer/seller of an option receives the option premium and thereby has an obligation to sell or buy the underlying if the buyer decides to exercise the option. The two types of options are calls and put. A call gives the holder the right to buy an asset at a certain price within a specific period of time. Calls are similar having a long position on a stock. Buyers of calls hope that the stock will increase substantially before the option expires. A put gives the holder the right to sell an asset at a certain period within a specific period of time. Puts are similar to having a long position on a stock. Buyers of puts hope that the price of the stock will fall before the option expires.

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Article: Download PDF   DOI : 10.36106/ijar  

Cite This Article:

Dr. Gaurav Malpani A Study on How “Options’ Work in Investment – A Guide to the Investors Indian Journal of Applied Research, Vol.III, Issue.VI June 2013

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