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* American Call Option:
+ Contract giving its owner the right to purchase a given number of shares (100) of a specific security at the strike price (X) at any time prior to maturity (T)
+ A call is not an obligation to buy 100 shares at $X per share. The owner of the call option only exercises if he/she finds it in his/her interest
+ Recall however that for each “long” side of the contract there is a “short” side. If you sell the option, you will be required to sell at $X per share when the option is exercised (which will only occur when the price of the underlying security is greater than $X)
+ “Zero sum game”
Types of Options
* American Put Option:
+ Contract giving its owner the right to sell a given number of shares (100) of a specific security at the strike price (X) at any time prior to maturity (T)
+ Again, if you sell this option, you must buy shares at $X if the option is exercised
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Category : Option TradingTags: call option, option contract, Option Trading