Options
An option is a financial product whose value increases or decreases. Based on the underlying asset value, such as stock options, oil options, index options, etc.
Options are contracts that give the holder the right to buy or sell an underlying asset or instrument at a specified price, on or before the specified option contract expiration date. Therefore, each option contract has a certain expiration date. which the holder must exercise the right within the specified period.
Options are divided into Call Options and Put Options :
- Call options are options contracts that allow the holder to purchase the underlying asset at the strike price within a specified period of time.
- Put Options are options contracts that allow the holder to sell the underlying asset at the strike price within a specified period of time.
And options are actually divided into options sellers and option buyers. The option buyer side has to pay a premium to the option seller. For example, an option buyer wants to buy the call options of stock A because they analyze that the stock will continue to rise in the next 3 months. From the option seller of Stock A, the seller opposes that Share A is unlikely to go up any further and will likely go down in the future.
Most retail investors are on the option buyer side. Being an option seller requires knowledge and experience. including having enough funds
Options are traded both on the Exchange and Over the Counter, where the off-market is mostly used in the business sector. It is intended to be used as a hedge against the risk that the price of goods or raw materials may change when the delivery date is reached. As for trading in the market, there are many purposes. Either focus on asset price hedging, focus on speculation or focus on generating passive income from being an option seller.