Aug 15

Online Options TradingA popular form of trading these days is the options trading. In financial terms, an option generally refers to a contract between a buyer and a seller which gives the buyer the right to either buy or sell an asset at a particular day at a particular price which has been agreed upon by the two. But the contract here gives the right and may not be an obligation for the particular person. Because of the right the seller gets a premium from his or her respective buyer.

There is a difference between the call and the put. The call gives the right to the buyer to buy the item where as the put gives the buyer the right to sell that particular asset. There is a long drawn contract between the two parties who are being a part of the options contract. The options contract may generally have the option given to the buyer of the contract, the price at which the transaction is going o occur, the quantity of the assets for which the contract has been drawn and any settlement terms if they need may arise.

Options contracts may be of the following types. Either the exchange option contract which has been done over an exchange and hence is a standardized contract or may be the over the counter contract which is written between the two parties and is not done over any particular exchange. There are several models which are sued to measure the value of the contract like the Black Scholes technique or the Stochastic volatility models. Thus these techniques to a certain extent help in determining the value of the contract.

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