From the category archives:

Options

Selling short in the derivatives market

Futures and options traders use the terms long and short similar to the regular equity markets. A long position means that the investor has bought the derivative instrument – futures or options. A short position means that the investor has sold the instrument. So selling short in futures is when the investor sells a contract, [...]

Read the full article →

Status of an Option

by R. Venkata Subramani

The status of an option changes on a daily basis depending upon the market rate of the underlying. To find out the status of the option, the market rate of the underlying is compared with the strike price of the option contract. Accordingly, an Option will fall into any one of the status viz., ITM, [...]

Read the full article →

Components of an Equity Options Contract

by R. Venkata Subramani

Underlying asset The value of derivative instrument is derived from the characteristics and value of a related stock and this is known as the underlying asset. The underlying can be any stock, commodity, bullion or Index. The underlying asset is the specific asset based on which the derivative contract is bought or sold. For e.g., [...]

Read the full article →

Call and Put Options

Call Option A call option is the right, but not an obligation to buy something at a fixed price – the strike price at anytime within the specified time period. In this definition, the “something” is the underlying which the investor has the right to buy or sell. The underlying is usually either an exchange [...]

Read the full article →

Types of options

by R. Venkata Subramani

A European option is an option that can be exercised only on the expiry date of the option, i.e. at a single pre-defined point in time. An American option is an option that can be exercised at any time before the expiry date. Other options where early exercise occurs differently are given below. However note [...]

Read the full article →

Next Entries →