25556 Chapter Notes - Chapter 15: Call Option, Put Option
Document Summary
The option buyer pays a price (the premium) to the option seller for the option: The buyer (holder) has the long position. The seller (writer) has the short position. Has the right to buy the contract item at the exercise price. Has the right to sell the contract item at the exercise price. Has the obligation to sell the contract item at the exercise price if the option is exercised. Has the obligation to buy the contract item at the exercise price if the option is exercised. Call options - an investment in call option has the aim of making a pro t. Pays the premium to the option seller. Hopes the value of the options will increase before expiry so the option can be sold for a higher price. Hopes the value of the options will fall before expiry. The best outcomes is if the options lapse at expiry because then they keep all of the premium.
