If you trust the movement of the price of the underlying asset and are willing to invest some money with hunger to take the risk of the premium amount, the profits can be significant. As for the Indian options market, a contract expires on the last Thursday of the month preceding which the contract is to be executed. Other contracts may be worthless with the amount of the unearned premium. The strike price, so that if the stock price falls, you can exercise the sales contract. If you don’t own the stock, a put option is a bearish vehicle that you can use to speculate on a prediction that the stock price will drop. It increases the value as the price of the underlying shares falls.
However, brokers sometimes engage in inappropriate trading options on behalf of customers who do not understand the risks. Using buying or selling options as an investment strategy is completely a game of speculation and assumption. As mentioned above, the difference between a purchase option and a put option is simple. An investor who buys a call seeks profit when the price of a stock increases.
Purchaser of a put option has a potentially unlimited advantage, but has a limited disadvantage, equal to the option price. If the market price of the underlying falls, the buyer will benefit from the sale because the market price falls below the option’s exercise price. If the investor’s feeling was incorrect and prices do not drop, the investor will only lose the option premium. If the market price of the shares exceeds the option’s exercise price, the option holder can exercise his option, buy at the strike price and sell at the highest market price for profit.
If strong market progress or a major announcement by the issuer has dramatically increased the stock price, the losses can be enormous. Investors can take advantage of declining price movements by selling calls or by buying wells. The benefit to the call writer is limited to the option premium.
It is determined to what extent the market price exceeds the option’s exercise price and how many options the investor has. The option’s exercise price is $ 50 and has an expiration date in November. You reach your investment when the ABC share price reaches $ 52, which means the sum of the premium paid plus the purchase price of call and put option the share. Therefore, the reward when the price of ABC shares increases in value is unlimited. For example, a contract for one purchase option may entitle the owner to purchase 100 Apple shares for $ 100 until the expiration date three months later. There are many expiration dates and strike prices that traders can choose from.
The point I’m trying to make is that traders negotiate options to record variations in the premium. However, I do not suggest in any way that you do not have to hold on to adulthood, I actually have options to adulthood in certain cases. In general, voice options sellers tend to hold contracts until maturity instead of option buyers.