An option is an agreement between two parties granting one the opportunity to buy or sell a security from or to the other party at a predetermined future date. An option allows the buyer to either buy or sell the asset at a certain price and date. Options can be a useful instrument for controlling risk, hedging against loss, and making predictions about price changes in different financial markets.
There are two types of options, call and put options. A call option gives the buyer the right but not the compulsion to buy an underlying asset at a predetermined price on or before the future date. The put option grants the right to sell the underlying asset at the strike price before or on the expiration date to the buyer.
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