- This topic has 327 replies, 321 voices, and was last updated 2 years, 8 months ago by
.
-
Posts
-
Premium is decided by the Buyer and Seller of Option. Company / Stock exchange does not have any role in deciding option price
Call Option: Buyer has Right to Buy.
Put Option: Seller has right to sell.
Premium is Decided By Buyer and Sellers.
CALL OPTION:
If a trader expects price to go up above a particular strike price before the expiry date, then he buys the call option contract from seller by paying the premium. The seller takes the risk of compensating if the price increases above the strike price. Risk is limited to the premium amount for the buyer.
PUT OPTION:
If a trader expects price to go below a particular strike price before the expiry date, then he buys the put option contract from seller by paying the premium. The seller takes the risk of compensating if the price decreases below the strike price. <span style=”line-height: 1.5;”>Risk is limited to the premium amount for the buyer.</span>
Call Option
The buyer buys a call option contract when he think the price may go above a particular price range (strike price) on or before a expiry date.
Buyer and seller together fix the premium amount. The buyer pays the premium to get the call option.
The buyer risk is limited to the premium amount.
If the strike price hit then the seller need to compensate the buyer with the current market price of the stock.
If the price didn’t cross the price marked then the seller can have the premium for himself.Put Option
Put option means the seller agrees to buy shares at a price below market price at the expiry of the contract time.
When a buyer is sure that the price of a share may go below a price range, then he buys put option contract of that share.
If the price go below the strike price, the seller need to compensate the buyer by paying the price below the strike price at the expiry.Call Option:
A call option is nothing but a person who buys the stock in call option will automatically get the rights to buy. the seller gives the rights to the buyers.
The seller has obligation but do not have any rights, where are the buyers will have the rights but will not have any obligations.
Put option:
In an put option, the buyer will automatically get the rights to sell and will not have any obligations, these rights are given by the seller who will only have obligation but will not have any rights.
Premium:
The premium is the initial about paid by the buyers and sellers. They decide the premium.
- You must be logged in to reply to this topic.
