An option class refers to all options of a specific type (call or put) that have the same underlying asset. Basically, it’s like a type or category in which similar financial options are grouped. Mainly, these consist of those options that share the same strike price and expiration date. They are also standardized, making them even more suitable for exchange trading.
1. What is a Call Option?
A call option is a type of financial contract that gives the option buyer the right, but not the obligation, to purchase a certain quantity of a security or commodity at a specified price within a specific time period.
2. What is a Put Option?
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A put option is another form of financial contract that gives the option buyer the right to sell a certain quantity of a security or commodity at a specified price within a specific time period.
3. What does ‘Strike Price’ mean in options trading?
The strike price in options trading is the predetermined price at which an option can be exercised. It’s the price at which the underlying security can be bought (for call options) or sold (for put options).
4. What is the ‘Expiration Date’ in options trading?
The expiration date in options trading is the last day an option can be exercised. After this date, the option essentially becomes worthless.
5. What is meant by ‘Standardized’ options?
‘Standardized’ in terms of options refers to the uniformity of the contracts. That is, all terms are clearly defined and remain identical across the board excluding the strike price and the expiration date. This uniformity ensures ease and certainty when trading options.