Options Trading

What is options?

An option is a type of derivative. It falls under the category of derivative,  as option is financial instrument which derives its value from the underlying asset.

The underlying asset may be index, stock, equity, currency or commodities to name a few.

The option is an agreement between the buyer and seller of the option, where in the buyer has the right but not the obligation to buy or sell the specified amount of the underlying asset at a specified price on or before the specified date.

Thus if the option buyer opts to exercise the option then the seller is obligated to sell as per the contract terms or price.

The two types of options are - call option and put option

One has to clearly understand the concept of call and put option before trying it out in the real market. As any misjudgment may lead to heavy losses.

Call Option - gives the buyer the right to buy the underlying asset at a specified price

Put Option - gives the buyer the right to sell the underlying asset at a specified price

Risk Mitigation

The process by which an organization introduces specific measures to minimize or eliminate unacceptable risks associated with its operations. Risk mitigation measures can be directed towards reducing the severity of risk consequences, reducing the probability of the risk materializing, or reducing the organizations exposure to the risk.