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Tagged: ofCall option, Option, Premium, Put option
What is call option and PUT option? Who decide the premium?
Call / Put option is a financial contract between two parties, the buyer and the seller. The buyer has the rights to buy the underlying asset at the expiry date however do not have any obligation. The seller of the contract has the obligation to exercise the contract if the buyer decides to do so.
Call option is a contract through which buyer gets the “Rights to Buy” the stocks at the strike price on the expiry date of the contract. Seller signs the contract but do not have any rights on the contract. Buyer do not have any obligations.
Put Option is a contract through which buyer gets the “Right to Sell” the stocks at the strike price on the expiry date of the contract. Seller signs the contract but do not have any rights on the contract. Buyer do not have any obligations.
Seller gets the Premium amount for signing the call/put option contract, where the premium is traded between buyer and seller.
In call option an put option only sellers signature will be there and the premium is fixed by him and buyer may/may not perform the contract on the expiry date .
In Call option,Buyer gets Right to buy and in Put option,Buyer gets Right to sell .
In Call option, if prices rise,Buyer gains where as in Put option ,if price falls ,Buyer gains.
Call option – is one where buyer gets the right to buy the shares at the proposed price however does not have any obligation. Seller signs the contract and should make the deal happen when buyer insists
Put option – is one where buyer gets the right to sell the shares at the proposed price however does not have any obligation. Seller signs the contract and should make the deal happen when buyer insists
In both the above cases seller gets the premium from the buyer after negotiations between the 2 of them are done
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