Part 1 Ride The Big Moves

What is an Option?

An option is a financial derivative whose value is derived from an underlying asset such as a stock, index, or commodity. Options come in two primary forms:

Call Option: It gives the holder the right to buy the underlying asset at a predetermined price (known as the strike price) before or on the expiry date.

Put Option: It gives the holder the right to sell the underlying asset at a predetermined strike price before or on the expiry date.

The buyer of an option pays a premium to the seller (also called the writer) for this right. The seller receives the premium as income but takes on the obligation to buy or sell the asset if the buyer chooses to exercise the option.