One month is the option term, which is a known pre-defined time frame, or Option’s Term, Option’s Duration;
The car is the “underlying asset” of this option contract, which is also known as “a known asset”;
$15,000 is the “strike price” of this contract, which is called “strike” in English, which means “a known price”;
$300 is the fee paid by both parties for mutual trust when they reach this contract, which is also the fee of this option contract, called “option premium”, in English, the price of the option;
From this example, we can see that an option is a contract that gives the buyer the right but does not make any obligations, allowing the buyer to exercise the right to sell or buy a specific underlying asset at a proposed price within a certain period of time in the future.
When the underlying asset of an option contract is a certain stock, that is, the two parties agree that before a certain time in the future, the buyer has the right to buy the seller’s stock or sell the buyer’s stock from the seller at a certain price, this contract is a “stock option contract.”
Similarly, when the underlying asset is an ETF , the transaction is an “ETF option transaction.”
Regarding the option term, the US market stipulates that the buyer can exercise the right at any time before the expiration date; while the EU market stipulates that the buyer can only exercise the right on the expiration date.
Option contracts are a very practical financial instrument that also meets the needs of various trading models, the most important of which are call options and put options.
What is a call option?
Call option, in English, is called Call Options.
A call option is the right of the buyer to buy the underlying asset at a specified price and quantity during the validity period of the option contract. The buyer usually believes that the value of the underlying asset will increase and earn the difference between the actual value and the specified value on the exercise date.
When you buy a call option, you acquire the right to buy an asset at a specific price on or before a certain date.
In the stock world, call options are also called “contract options” or “buy options . “
The contract means that the buyer believes that the stock price will rise in the future, so he signs a call option contract with the seller.
