Provides a definition of option trading. Our lesson covers the types of options and various option transactions.

1. Options
by fundsacademy.com

2. What is an option?
“a contract giving the buyer the right but not the
obligation to buy or sell an underlying asset at a
specific price on or before a certain date”

3. Do you know your ‘Calls’ from ‘Puts’?
• Call options give the option to buy at certain
price
• Put options give the option to sell at a
certain price

4. Details on an Option Contract:
• Strike price
• Right to buy or sell?
• Quantity of underlying asset
• Premium to be paid
• Settlement details

5. Main Option categories:
• European option - can only be exercised on
expiration
• American option - may be exercised on any
trading day on or before expiry.
• Exotic option - a broad category of options
that may include complex financial structures.
• Vanilla option - any option that is not exotic.

6. Where are options traded?
• Typically options are traded in standard
contracts on several futures and options
exchanges
• Some options are traded between two
private parties, known as Over The Counter
or OTC options.

7. Now take a read of below article
before finally taking the quiz!
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