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코인픽:ver.2021년 비트코인 마진,선물거래소 순위 및 추천 사이트

Options Contract

2021.08.28 07:42

UNICORN 조회 수:211

Hi It's Unicorn

 

What is an option?

 

An option is a contract which conveys its owner the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price prior to or on a specified date, depending on the form of the option. Simply out, an option refers to the holder has right to choose. Option is very similar to futures and contract transactions. All of them allow to deliver an underlying asset or financial instrument at a specific price on a specific date in the future. The difference is that  the buyer of options has right to choose to exercise the right. The concept of options is like a prepayment or deposit. Buyers pay a deposit in advance to ensure that they can buy and sell goods at a specific price in the future; buyers also can choose to abandon the right according to the situation. Therefore, we call this deposit, premium.

 

The following are key elements of options:

 

1. Underlying asset: The asset you agree to buy or sell by options contract. For instance, the underlying asset of BTC options is BTC.

 

2. Premium: The amount is paid by the buyer to purchase the Options Contract. No matter the contract is executed or not, premium will not be returned.

 

3. Margins: The security to ensure that the seller will perform the contract.

 

4. Exercise time: The date on which the buyer can exercise their right by options contract.

 

5. Strike price: The price of the options contract the holder can buy or sell as stipulated when the exercise time is expiry. 

 

6. Exercise: The option that buyers choose to execute their right.

 

7. Options direction: call options and put options.

 

Buyers and sellers of options

 

There are buyers(owners) and sellers in the option market. The owner holding the option contact can choose to execute the contract at a certain timing in the future, which is called "exercise", and the buyer also can choose to waive the right according to the situation. Conversely, the seller has no right to choose and has the corresponding obligation to fulfill the transaction (to sell or buy) if the owner "exercises" the option.

 

Investors can decide to buy or sell an options contract based on their needs or their determination on market conditions. When an option is exercised, the cost to the buyer of the asset acquired is the strike price plus the premium. If the option is not exercised, the premium is income to the seller, and normally a capital loss to the buyer. In other word, the buyer gets the option by paying the premium, and earns the spread by determining market trend; while the seller sells the option to earn buyer's premium so hopes that the buyer determines wrong market trend to reduce the loss.

 

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Call Options and Put Options

 

Call Options: It refers to the owner the right to buy at a specific price within a certain period of time in the future.

 

Put Options: It refers to the right of the owner to sell at a specific price within a certain period of time in the future.

 

A call option would normally be exercised only when the strike price is below the market value of the underlying asset, while a put option would normally be exercised only when the strike price is above the market value.

 

For example, Cindy wants to buy a limited edition bag. Since she thinks that the bag may increase in price after it is listed, she wants to get a lower price than original price. Therefore, she paid the premium to the seller to ensure she can buy it with a lower price after the bag is listed in the market. If the price of the bag does go up after it is listed in the market, Cindy can get the bag with the agreed price. The spread is her profits. On the contrary, the price of the bag does fall after it is listed in the market, the loss is more than the premium she paid. Cindy can choose not to purchase the bag with agreed price so she will only loss the initial premium she paid; while the seller earns the premium by the buyer as profit.