This article mainly introduces the popular science of options: what are call options and put options? An option is a financial derivative instrument that grants the holder the right, but not the obligation, to agree or sell a certain amount of the underlying asset at a specific time in the future. There are two broad categories of options: call and put, which represent expectations of the underlying asset, respectively. This article**ferry: Caishun options
Popular Science of Options What are call options and put options?
Call options
A call option, as the name suggests, is an investment tool that bets on the upside. It grants the holder the right to purchase a certain amount of the underlying asset at an agreed ** (exercise price) at a specific time in the future, and the holder wants the underlying asset *** to buy at a lower ** and obtain the profit of the difference when exercising.
Investors who hold call options expect the underlying asset to rise in the future. If the underlying asset is higher than the strike price before the option expires, the holder may choose to exercise the option and purchase the underlying asset as agreed. As a result, the value of the call option increases when the underlying asset is ***.
Put options
In contrast to a call option, a put option is an investment instrument that is used in anticipation of the underlying asset**. It grants the holder the right to sell a certain amount of the underlying asset at an agreed ** (strike price) at a specific time in the future. The holder wants the underlying asset*** in order to sell it at a higher ** and make a profit on the spread when the option is exercised.
Investors who hold put options expect that the underlying asset will be in the future. If the underlying asset falls below the strike price before the option expires, the holder may choose to exercise the option and sell the underlying asset as agreed. As a result, the value of the put option increases when the underlying asset is ***.
Use and Risks of Options.
The use of options is very widespread in the financial markets, helping investors to achieve strategies such as portfolio management, arbitrage, and hedging. The risks associated with options trading should not be overlooked.
*Investors of options need to pay a certain option fee as a premium, which is the cost of purchasing the right. If the underlying asset** fails to meet or exceed the strike price at the time of expiration, the holder may choose not to exercise the option, but will forfeit the option fee paid. As a result, investors in options are exposed to a potential risk of loss.
Investors who sell options are exposed to potentially unlimited risk of loss. The investor who sells a call option bears the risk that the underlying asset may need to be sold below the market price in the event of the underlying asset***. Similarly, an investor who sells a put option takes on the risk that the underlying asset may need to be purchased at a higher price than the market** in the case of the underlying asset***.
Conclusion: Options, as a financial instrument, provide investors with the opportunity to profit in the expectation of the underlying asset. Call and put options, as the two basic forms of options, represent different market expectations. Investors can choose the appropriate type of options to trade according to the judgment of the market trend, but at the same time, they should also pay attention to the risks brought by options trading.