The buyer has purchased the option to carry out a certain transaction in the future -- hence the name.
There are two types of options: call options and put options.A buyer of a call option has the right to buy the underlying asset for a certain price.Vanilla Option -- A normal option with no special features, terms or conditions.American Option -- Option that can be exercised any time before the expiration date.He chooses whether or not they will complete the transaction.
When the option expires, if the buyer doesn't want to exercise the option, he doesn't have to.
The options writer is the party that "writes," or creates, the options contract, and then sells it.
If the investor who buys the contract chooses to exercise the option, the writer is obligated to fulfill the transaction by buying or selling the underlying asset, depending on the type of option he wrote.
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Expiration Date -- The last day an options contract can be exercised.