What is call option and PUT option? Who decide the premium?

[Vijayakumar]

Call option:

• The buyer expects the price to go up beyond a particular value (strike price) at the expiry.
• Seller takes the risk of compensating the price above the strike price at the expiry.
• Buyer is ready to pay the premium that the buyer expects to take that risk.
• Buyers risk is limited to the premium paid; Return is unlimited beyond (strike price + premium price).
• Sellers risk is unlimited beyond the (strike price + premium price); Return is limited to premium.

Put option:

• The buyer expects the price to go down below a particular value (strike price) at the expiry.
• Seller takes the risk of compensating the price below the strike price at the expiry.
• Buyer is ready to pay the premium that the buyer expects to take that risk.
• Buyers risk is limited to the premium paid; Return is unlimited below (strike price – premium price).
• Sellers risk is unlimited below the (strike price – premium price); Return is limited to premium.

In both the cases, the premium is decided by the buyer & seller together.

[Naveen]

when a trader knows that the price go beyond a price he enters in to contract and he pays some premium if the stock doesn’t go beyond the strike price which he entered in to contract there is no loss except the premium it will be a minimum when compared to futures and same in the put option the buyer knows the stock will decrease and he enters in to contract the seller receive the premium and the premium is decided buyer and seller together .

[Lakshmisudha R]

Call option – Buyer gets the rights from the seller to buy at the strike price without any obligation to execute the contract <span style=”line-height: 1.5;”>on agreed premium to seller</span>

Put Option – Buyer gets the rights from the seller to sell without any obligation to execute the contract on agreed premium to seller

In both the options buyer and seller decides the premium.

 

[kanakaraj]

Call Option- The buyer of the contract has the rights to buy at the strike price
Put Option- The buyer of the contract has the rights to sell at the strike price

The buyer and seller decides the premium in both the options.
Buyer is paying the premium.

[EQSIS]

 

Buyer of Options does not have any obligations

 

[Author]

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