Part 7 Trading Master Class What Are Options?
Options are financial derivatives, meaning their value is derived from an underlying asset such as stocks, indices, commodities, or currencies.
An option is a contract that gives the buyer the right, but not the obligation, to buy or sell the underlying asset at a predefined price before or on a fixed date.
There are two types of options:
1. Call Option
Gives the right to buy.
A trader buys a call if they expect the price of the underlying asset to go up.
2. Put Option
Gives the right to sell.
A trader buys a put if they expect the price to go down.
Each option has:
Strike Price: The price at which buying/selling occurs.
Expiry Date: The last date the contract is valid.
Premium: The price paid to buy the option.
