Part 2 Ride The Big Moves

Key Components of an Option Contract

To understand option trading, it’s essential to know the basic elements that define each contract:

Underlying Asset: The financial instrument (stock, index, currency, or commodity) on which the option is based.

Strike Price: The price at which the option holder can buy or sell the asset.

Expiration Date: The date on which the option contract expires. After this date, the option becomes worthless if not exercised.

Premium: The price paid by the buyer to the seller (writer) of the option.

Lot Size: The number of units of the underlying asset in one option contract (for example, 50 shares per lot).