foreign investment essay.docx

foreign investment essay.docx - Page 1 of 4 OPTION MARKET A...

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Page 1 of 4 OPTION MARKET: A BANNED PLATFORM UNDER SHARIA’H BUT A MUST FOR FDI Written by:Neha Asif BBA7 (FINANCE) 01-111142-143 Option markets provide option contracts, which gives the exclusive right to one of two parties, entitling the bearer to sell or buy something specific in return for a specific price, within a set period or until a certain date, either directly or through a separate body that guarantees the rights of both parties. The prominent in this market are put option and call option contracts. Call option gives the purchaser the right to go ahead with the purchase or cancel it within a specific period. As for the seller, he has no right to change his mind about the deal, so long as he has received the price for this option, which is known as the premium. The purchaser is protected against any rise in the price of the deal, and the seller gets the premium in addition to the value of the deal at the time of the contract, if the purchaser goes ahead with the purchase. whereas owner of the put option have the right to sell a specific number of shares or other financial certificates for a certain price within a specific period, but he is not obliged to sell, so it is optional. As for the one who receives the money for this option, he is compelled to buy if the purchaser of this right decides to sell for the price agreed upon, during the specified time period. The main objective to own these contracts is not about any specific shares but it is about the right of ownership. Basically commitments are being sold in these markets with only one of the buyer or seller is being binded. It's evident why they seem to be the center of attention in financial circles today. With online brokerages providing direct access to the options markets through the internet and insanely low commission costs, the average retail investor now has the ability to use the most powerful tool in the investment industry just like the pros do. options can provide these advantages to your portfolio: Greater Cost Efficiency, Less Risk, Higher Potential Returns, and More Strategic Alternative. Diverting the talk towards Pakistan ,as PSX initiates process to launch derivatives Analyst Adnan Sheikh at Topline Securities said currently, there are basic forms of derivatives available in the market. “New products will boost traded value and scale up number of investment avenues,” Sheikh said. “This will also open market access to hedge funds trading.” Summing up this will further improve liquidity and provide investors with greater choices in managing their investment portfolio’s. (feb19,2017). when you buy an option, you have a right but not an obligation to do something with it. You can always let the expiration date go by, at which point the option becomes worthless. If this happens, however, you lose 100% of your investment, which is the money you used to pay for the option premium. Second, an option is merely a contract that deals with an underlying
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