Maturity or expiration is the date when the owner or

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Maturity or expiration; is the date when the owner or buy uses the call or put option. In the money option, means the option is profitable to use. Out of the money, means the option is not profitable to use. Note, most UK equity options deal in 1,000 shares whereas options on American equities are usually in 100 shares. But information such as this should always be confirmed with your broker or online before any trading is done. American – allows the holder to exercise the right to purchase (if a call) or sell (if a put) the underlying asset on or before the expiration date. European - allows the holder to exercise the right to purchase (if a call) or sell (if a put) the underlying asset only on the expiration date. Since American options allow more leeway, they are more valuable than their European counterparts. Over the counter: OTC market offers the advantage that the terms of the options contract- exercise price, expiration date and number of shares committed- can be tailored to the needs of the traders. The costs of establishing an OTC options contract, however, are higher than for exchange traded options. Exchange traded: Options contracts traded on exchanges are standardized in terms of expiration date and exercise price. Right to buy or sell 1000 shares of stock (except when stock split occurs) Standardization of the terms of listed options contracts means all market participants trade in a limited and uniform set of securities. This increases the depth of trading in any particular option, which lowers trading costs and results in a more competitive market. Exchanges offer two important benefits: Ease of trading Liquid secondary market The London International Financial Futures and Options Exchange is a futures exchange based in London. LIFFE is now part of Intercontinental Exchange group following a series of takeovers. Stock options : if it is a call option its an option to buy an asset at a pre specified price on or before maturity. If it is a put option, it is an option to sell at pre specified price before or on date.
Index option : means option to buy a market index (snp500 or ftsee 100) which is traded on several indexes. Sold both for call and put options. Future options give the holder right to buy or sell a future contract using a future price at or before the expiration date. Foreign currency option which is an option that gives a right to buy or sell a specific quantity of currency for exchange of a specific amount of domestic currency for example UK sterling. Interest rate options which are options which are traded on treasury notes and treasury bonds. Many types of option strategies exist, with exotic names such as straddles, strips, spreads and combinations. All these strategies can be understood easily once you grasp the features of four fundamental option strategies. Call and put purchases. Call and put writes. The features of these strategies can be seen by examining the relationship between the price of the underlying asset and the profit/loss. When an investor buys a call option his forecasting is that the future share price is going to increase. So, if the exercise price is 100 pounds then in this case the investor forecasts that in future the share price is going to increase more than 100 pounds.

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